FIRST DIVISION[G.R. No. L-31831. April 28, 1983.]JESUS PINEDA, petitioner, vs. JOSE V. DELA RAMA and COURT OF APPEALS, respondent.Rosauro Alvarez for petitioner.Arturo Zialcita for respondents.SYLLABUS1.COMMERCIAL LAW; NEGOTIABLE. INSTRUMENTS LAW; SECTION 24; CONSIDERATION; PRESUMPTION THAT NEGOTIABLE INSTRUMENT IS ISSUED FOR VALID CONSIDERATION IS ONLY PRIMA FACIE. The Court of Appeals' reliance on Section 24 of the Negotiable Instruments Law is misplaced. The presumption that a negotiable instrument is issued for a valuable consideration is only prima facie. It can be rebutted by proof to the contrary.2.CIVIL LAW; CONTRACTS; VOID CONTRACT; PROMISSORY NOTE EXECUTED FOR AN ILLEGAL CONSIDERATION. The consideration for the promissory note to influence public officers in the performance of their duties is contrary to law and public policy. The promissory note is void ab initio and no cause of action for the collection cases can arise from it.D E C I S I O NGUTIERREZ, JR., J p:This is a petition to review on certiorari a decision of the Court of Appeals which declared petitioner Jesus Pineda liable on his promissory note for P9,300.00 and directed him to pay attorney's fees of P400.00 to private respondent, Jose V. dela Rama.Dela Rama is a practicing lawyer whose services were retained by Pineda for the purpose of making representations with the chairman and general manager of the National Rice and Corn Administration (NARIC) to stop or delay the institution of criminal charges against Pineda who allegedly misappropriated 11,000 cavans of palay deposited at his ricemill in Concepcion, Tarlac. The NARIC general manager was allegedly an intimate friend of Dela Rama. prcdAccording to Dela Rama, petitioner Pineda has used up all his funds to buy a big hacienda in Mindoro and, therefore, borrowed the P9,300.00 subject of his complaint for collection. In addition to filing the suit to collect the loan evidenced by the matured promissory note, Dela Rama also sued to collect P5,000.00 attorney's fees for legal services rendered as Pineda's counsel in the case being investigated by NARIC.The Court of First Instance of Manila decided Civil Case No. 45762 in favor of petitioner Pineda. The court believed the evidence of Pineda that he signed the promissory note for P9,300.00 only because Dela Rama had told him that this amount had already been advanced to grease the palms of the Chairman and General Manager of NARIC in order to save Pineda from criminal prosecution.The court stated:xxx xxx xxx". . . The Court, after hearing the testimonies of the witnesses and examining the exhibits in question, finds that Exhibit A proves that the defendant himself did not receive the amount stated therein, because according to said exhibit that amount was advanced by the plaintiff in connection with the defendant's case, entirely contradicting the testimony of the plaintiff himself, who stated in open Court that he gave the amount in cash in two installments to the defendant. The Court is more inclined to believe the contents of Exhibit A, than the testimony of the plaintiff. On this particular matter, the defendant has established that the plaintiff made him believe that he was giving money to the authorities of the NARIC to grease their palms to suspend the prosecution of the defendant, but the defendant, upon inquiry, found out that none of the authorities has received that amount, and there was no case that was ever contemplated to be filed against him. It clearly follows, therefore, that the amount involved in this Exhibit A was imaginary. It was given to the defendant, not to somebody else. The purpose for which the amount was intended was illegal."However, the Court believes that plaintiff was able to get from the defendant the amount of P3,000.00 on October 7, as shown by the check issued by the defendant, Exhibit 2, and the letter, Exhibit 7, was antedated October 6, as per plaintiff's wishes to show that defendant was indebted for P3,000.00 when, as a matter of fact, such amount was produced in order to grease the palms of the NARIC officials for withholding an imaginary criminal case. Such amount was never given to such officials nor was there any contemplated case against the defendant. The purpose for which such amount was intended was indeed illegal."The trial court rendered judgment as follows:"WHEREFORE, the Court finds by a preponderance of evidence that the amount of P9,300.00 evidenced by Exhibit A was not received by the defendant, nor given to any party for the defendant's benefit. Consequently, the plaintiff has no right to recover said amount. The amount of P3,000.00 was given by the defendant to grease the palms of the NARIC officials. The purpose was illegal, null and void. Besides, it was not given at all, nor was it true that there was a contemplated case against the defendant. Such amount should he returned to the defendant. The services rendered by the plaintiff to the defendant is worth only P400.00, taking into consideration that the plaintiff received an air-conditioner and six sacks of rice. The court orders that the plaintiff should return to the defendant the amount of P3,000.00, minus P400.00 plus costs."The Court of Appeals reversed the decision of the trial court on a finding that Pineda, being a person of more than average intelligence, astute in business, and wise in the ways of men would not "sign any document or paper with his name unless he was fully aware of the contents and important thereof, knowing as he must have known that the language and practices of business and of trade and commerce call to account every careless or thoughtless word or deed."The appellate court stated:"No rule is more fundamental and by men of honor and goodwill more dearly cherished, than that which declares that obligations arising from contracts have the force of law between the contracting parties and should be complied with in good faith. Corollary to and in furtherance of this principle, Section 24 of the Negotiable Instruments Law (Act No. 2031) explicitly provides that every negotiable instrument is deemed prima facie to have been issued for a valuable consideration, and every person whose signature appears thereon to have become a party thereto for value."We find this petition meritorious.The Court of Appeals relied on the efficacy of the promissory note for its decision, citing Section 24 of the Negotiable Instruments Law which reads:SECTION 24.Presumption of consideration. Every negotiable instrument is deemed prima facie to have been issued for a valuable consideration and every person whose signature appears thereon to have become a party thereto for value."The Court of Appeals' reliance on the above provision is misplaced. The presumption that a negotiable instrument is issued for a valuable consideration is only prima facie. It can be rebutted by proof to the contrary. (Bank of the Philippine Islands v. Laguna Coconut Oil Co. et al., 48 Phil. 5)."According to Dela Rama, he loaned the P9,300.00 to Pineda in two installments on two occasions five days apart first loan for P5,000.00 and second loan for P4,300.00, both given in cash. He also alleged that previously he loaned P3,000.00 but Pineda paid this other loan two days afterward.These allegations of Dela Rama are belied by the promissory note itself. The second sentence of the note reads "This represents the cash advances made by him in connection with my case for which he is my attorney-in-law."The terms of the note sustain the version of Pineda that he signed the P9,300.00 promissory note because he believed Dela Rama's story that these amounts had already been advanced by Dela Rama and given as gifts for NARIC officials.Dela Rama himself admits that Pineda engaged his services to delay by one month the filing of the NARIC case against Pineda while the latter was trying to work out an amicable settlement. There is no question that Dela Rama was indeed a close friend of then NARIC Administrator Jose Rodriguez having worked with him in the Philippine consulate at Hongkong and that Dela Rama made what he calls "proper representations" with Rodriguez and with other NARIC officials in connection with the investigation of the criminal charges against Pineda. CdprWe agree with the trial court which believed Pineda. It is indeed unusual for a lawyer to lend money to his client whom he had known for only three months, with no security for the loan and on interest. Dela Rama testified that he did not even know what Pineda was going to do with the money he borrowed from him. The petitioner had just purchased a hacienda in Mindoro for P210,000.00, owned sugar and rice lands in Tarlac of around 800 hectares, and had P60,000.00 deposits in three banks when he executed the note. It is more logical to believe that Pineda would not borrow P5,000.00 and P4,300.00 five days apart from a man whom he calls a "fixer" and whom he had known for only three months.There is no dispute that an air-conditioning unit valued at P1,250.00 was purchased by Pineda's son and given to Dela Rama although the latter claims he paid P1,250.00 for the unit when he received it. Pineda, however, alleged that he gave the air-conditioning unit because Dela Rama told him that Dr. Rodriguez was asking for one air-conditioning machine of 1.5 horsepower for the latter's NARIC office. Pineda further testified that six cavans of first class rice also intended for the NARIC Chairman and General Manager, together with the air-conditioning unit, never reached Dr. Rodriguez but were kept by the lawyer.Considering the foregoing, we agree with the trial court that the promissory note was executed for an illegal consideration. Articles 1409 and 1412 of the Civil Code in part, provide:Art. 1409.The following contracts are inexistent and void from the beginning:(1)Those whose cause, object or purpose is contrary to law, morals, good customs, public order and public policy;xxx xxx xxxArt. 1412.If the act in which the unlawful or forbidden cause consists does not constitute a criminal offense, the following rules shall be observed:(1)When the fault is on the part of both contracting parties, neither may recover what he has given by virtue of the contract, or demand the performance of the other's undertaking.xxx xxx xxxWhether or not the supposed cash advances reached their destination is of no moment. The consideration for the promissory note to influence public officers in the performance of their duties is contrary to law and public policy. The promissory note is void ab initio and no cause of action for the collection cases can arise from it. cdrepWHEREFORE, the decision of the Court of Appeals is SET ASIDE, The complaint and the counterclaim in Civil Case No. 45762 are both DISMISSED.SO ORDERED.Teehankee (Chairman), Melencio-Herrera, Plana, Vasquez and Relova, JJ., concur.EN BANC[G.R. No. L-26767. February 22, 1968.]ANG TIONG, plaintiff-appellee, vs. LORENZO TING, doing business under the name & style of PRUNES PRESERVES MFG., & FELIPE ANG, defendants, FELIPE ANG, defendant-appellant.Chipeco & Alcaraz, Jr. for plaintiff-appellee.Ang, Atienza & Tabora for defendant-appellant.SYLLABUS1.NEGOTIABLE INSTRUMENTS LAW; CHECKS; GENERAL INDORSER, DEFINED. A bank check is indisputably a negotiable instrument and should be governed solely by the Negotiable Instruments Law (see secs. 1 and 15). Section 63 of the Negotiable Instruments Law makes "a person placing his signature upon an instrument otherwise than as maker, drawer or acceptor" a general indorser "unless he clearly indicates by appropriate words his intention to be bound in some other capacity." Section 66 of the same law 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 if it be dishonored, he will pay the amount thereof to the holder."2.ID.; ID.; LIABILITIES OF AN ACCOMMODATION PARTY. Section 29 of the Negotiable Instruments Law by clear mandate makes the accommodation party "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". It is not a valid defense that the accommodation party did not receive any valuable consideration when he executed the instrument. It is not correct to say that the holder for value is not a holder in due course merely because at the time he acquired the instrument, he knew that the indorser was only an accommodation party.D E C I S I O NCASTRO, J p:On August 15, 1960 Lorenzo Ting issued Philippine Bank of Communications check K-81618, for the sum of P4,000, payable to "cash or bearer". With Felipe Ang's signature (indorsement in blank) at the back thereof, the instrument was received by the plaintiff Ang Tiong who thereafter presented it to the drawee bank for payment. The bank dishonored it. The plaintiff then made written demands on both Lorenzo Ting and Felipe Ang that they make good the amount represented by the check. These demands went unheeded; so he filed in the municipal court of Manila an action for collection of the sum of P4,000, plus P500 attorney's fees. On March 6, 1962 the municipal court adjudged for the plaintiff against the two defendants.Only Felipe Ang appealed to the Court of First Instance of Manila (civil case 50018), which rendered judgment on July 31, 1962, amended by an order dated August 9, 1962, directing him to pay to the plaintiff "the sum of P4,000, with interest at the legal rate from the date of the filing of the complaint, a further sum of P400 as attorney's fees, and costs."Felipe Ang then elevated the case to the Court of Appeals, which certified it to this Court because the issues raised are purely of law.The appellant imputes to the court a quo three errors, namely, (1) that it refused to apply article 2071 of the new Civil Code to the case at bar; (2) that it adjudged him a general indorser under the Negotiable Instruments Law (Act 2031); and (3) that it held that he "cannot obtain his release from the contract of suretyship or obtain security to protect himself against any proceedings on the part of the creditor and against the danger of insolvency of the principal debtor," because he is "jointly and severally liable on the instrument."This appeal is absolutely without merit.1.The genuineness and due execution of the instrument are not controverted. That the appellee is a holder thereof for value is admitted.Having arisen from a bank check which is indisputably a negotiable instrument, the present case is, therefore, in so far as the indorsee is concerned vis-a-vis the indorser, governed solely by the Negotiable Instruments Law (see secs. 1 and 185). Article 2071 of the new Civil Code, invoked by the appellant, the pertinent portion of which states, "The guarantor, even before having paid, may proceed against the principal debtor: (1) when he is sued for the payment; . . . the action of the guarantor is to obtain release from the guaranty, to demand a security that shall protect him from any proceedings by the creditor . . .," is here completely irrelevant and can have no application whatsoever.We are in agreement with the trial judge that nothing in the check in question indicates that the appellant is not a general indorser within the purview of section 63 of the Negotiable Instruments Law which makes "a person placing his signature upon an instrument otherwise than as maker, drawer or acceptor" a general indorser, "unless he clearly indicates by 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 qualifications, 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." 1 2.Even on the assumption that the appellant is a mere accommodation party, as he professes to be, he is nevertheless, by the clear mandate of section 29 of the Negotiable Instruments Law, yet "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." To paraphrase, the accommodation party is liable to a holder for value as if the contract was not for accommodation. It is not a valid defense that the accommodation party did not receive any valuable consideration when he executed the instrument. Nor is it correct to say that the holder for value is not a holder in due course merely because at the time he acquired the instrument he knew that the indorser was only an accommodation party. 2 3.That the appellant, again assuming him to be an accommodation indorser, may obtain security from the maker to protect himself against the danger of insolvency of the latter, cannot in any manner affect his liability to the appellee, as the said remedy is a matter of concern exclusively between accommodation indorser and accommodated party. So that the fact that the appellant stands only as a surety in relation to the maker, granting this to be true for the sake of argument, is immaterial to the claim of the appellee, and does not a whit diminish nor defeat the rights of the latter who is a holder for value. The liability of the appellant remains primary and unconditional. To sanction the appellant's theory is to give unwarranted legal recognition to the patent absurdity of a situation where an indorser, when sued on an instrument by a holder in due course and for value, can escape liability on his indorsement by the convenient expedient of interposing the defense that he is a mere accommodation indorser.Accordingly, the judgment a quo is affirmed in toto, at appellant's cost.Concepcion, C.J., Reyes, J.B.L., Dizon, Makalintal, Bengzon, J.P., Zaldivar, Sanchez, Angeles and Fernando, JJ., concur.THIRD DIVISION[G.R. No. 56169. June 26, 1992.]TRAVEL-ON, INC., petitioner, vs. COURT OF APPEALS and ARTURO S. MIRANDA, respondents.Eladio B. Samson for petitioner.Benjamin Bernardino & Associates Law Offices for private respondent.SYLLABUS1.COMMERCIAL LAW; NEGOTIABLE INSTRUMENTS LAW; PRESUMPTION OF CONSIDERATION; RULE. It is important to stress that a check which is regular on its face is deemed prima facie to have been issued for a valuable consideration and every person whose signature appears thereon is deemed to have become a party thereto for value. Thus, the mere introduction of the instrument sued on in evidence prima facie entitles the plaintiff to recovery. Further, the rule is quite settled that a negotiable instrument is presumed to have been given or indorsed for a sufficient consideration unless otherwise contradicted and overcome by other competent evidence.2.ID.; ID.; ID.; BURDEN OF PROOF TO REBUT THEREOF; LIES WITH THE DRAWER; CASE AT BAR. In the case at bar, the Court of Appeals, contrary to these established rules, placed the burden of proving the existence of valuable consideration upon petitioner. This cannot be countenanced; it was up to private respondent to show that he had indeed issued the checks without sufficient consideration. The Court considers that private respondent was unable to rebut satisfactorily this legal presumption. It must also be noted that those checks were issued immediately after a letter demanding payment had been sent to private respondent by petitioner Travel-On.3.ID.; ID.; ACCOMMODATION TRANSACTION; NOT ESTABLISHED IN CASE AT BAR; REASONS THEREFOR. We are unable to accept the Court of Appeals' conclusion that the checks here involved were issued for "accommodation" and that accordingly private respondent maker of those checks was not liable thereon to petitioner payee of those checks. In the first place, while the Negotiable Instruments Law does refer to accommodation transactions, no such transaction was here shown. In accommodation transactions recognized by the Negotiable Instruments Law, an accommodating party lends his credit to the accommodated party, by issuing or indorsing a check which is held by a payee or indorsee as a holder in due course, who gave full value therefor to the accommodated party. The latter, in other words, receives or realizes full value which the accommodated party then must repay to the accommodating party, unless of course the accommodating party intended to make a donation to the accommodated party. But the accommodating party is bound on the check to the holder in due course who is necessarily a third party and is not the accommodated party. Having issued or indorsed the check, the accommodating party has warranted to the holder in due course that he will pay the same according to its tenor.4.ID.; ID.; ID.; LIABILITY OF DRAWER IN THE ABSENCE OF PROOF THEREOF; CASE AT BAR. In the case at bar, Travel-On was payee of all six (6) checks; it presented these checks for payment at the drawee bank but the checks bounced. Travel-On obviously was not an accommodated party; it realized no value on the checks which bounced. Travel-On was entitled to the benefit of the statutory presumption that it was a holder in due course, that the checks were supported by valuable consideration. Private respondent maker of the checks did not successfully rebut these presumptions. The only evidence aliunde that private respondent offered was his own self-serving uncorroborated testimony. He claimed that he had issued the checks to Travel-On as payee to "accommodate" its General Manager who allegedly wished to show those checks to the Board of Directors of Travel-On to "prove" the Travel-On's account receivable were somehow "still good." It will be seen that this claim was in fact a claim that the checks were merely simulated, that private respondent did not intend to bind himself thereon. Only evidence of the clearest and most convincing kind will suffice for that purpose; no such evidence was submitted by private respondent. The latter's explanation, was denied by Travel-On's General Manager; that explanation in any case, appears merely contrived and quite hollow to us. Upon the other hand, the accommodation" or assistance extended to Travel-On's passengers abroad as testified by petitioner's General Manager involved, not the accommodation transactions recognized by the NIL, but rather the circumvention of them existing foreign exchange regulations by passengers booked by Travel-On, which incidentally involved receipt of full consideration by private respondent. Thus, we believe and so hold that private respondent must be held liable on the six (6) checks here involved. Those checks in themselves constituted evidence of indebtedness of private respondent, evidence not successfully overturned or rebutted by private respondent.5.CIVIL LAW; MORAL DAMAGES; AWARD THEREOF, NOT PROPER IN THE ABSENCE OF BAD FAITH. The award of moral damages to private respondent must be set aside, for the reason that petitioner's application for the writ of attachment rested on sufficient basis and no bad faith was shown on the part of Travel-On. If anyone was in bad faith, it was private respondent who issued bad checks and then pretended to have "accommodated" petitioner's General Manager by assisting her in a supposed scheme to deceive petitioner's Board of Directors and to misrepresent Travel-On's financial condition.R E S O L U T I O NFELICIANO, J p:Petitioner Travel-On, Inc. ("Travel-On") is a travel agency selling airline tickets on commission basis for and in behalf of different airline companies. Private respondent Arturo S. Miranda had a revolving credit line with petitioner. He procured tickets from petitioner on behalf of airline passengers and derived commissions therefrom.On 14 June 1972, Travel-On filed suit before the Court of First Instance ("CFI") of Manila to collect on six (6) checks issued by private respondent with a total face amount of P115,000.00. The complaint, with a prayer for the issuance of a writ of preliminary attachment and attorney's fees, averred that from 5 August 1969 to 16 January 1970, petitioner sold and delivered various airline tickets to respondent at a total price of P278,201.57; that to settle said account, private respondent paid various amounts in cash and in kind, and thereafter issued six (6) postdated checks amounting to P115,000.00 which were all dishonored by the drawee banks. Travel-On further alleged that in March 1972, private respondent made another payment of P10,000.00 reducing his indebtedness to P105,000.00. The writ of attachment was granted by the court a quo. CdprIn his answer, private respondent admitted having had transactions with Travel-On during the period stipulated in the complaint. Private respondent, however, claimed that he had already fully paid and even overpaid his obligations and that refunds were in fact due to him. He argued that he had issued the postdated checks for purposes of accommodation, as he had in the past accorded similar favors to petitioner. During the proceedings, private respondent contested several tickets alleged to have been erroneously debited to his account. He claimed reimbursement of his alleged overpayments, plus litigation expenses, and exemplary and moral damages by reason of the allegedly improper attachment of his properties.In support of his theory that the checks were issued for accommodation, private respondent testified that he had issued the checks in the name of Travel-On in order that its General Manager, Elita Montilla, could show to Travel-On's Board of Directors that the accounts receivable of the company were still good. He further stated that Elita Montilla tried to encash the same, but that these were dishonored and were subsequently returned to him after the accommodation purpose had been attained.Travel-On's witness, Elita Montilla, on the other hand explained that the "accommodation" extended to Travel-On by private respondent related to situations where one or more of its passengers needed money in Hongkong, and upon request of Travel-On respondent would contact his friends in Hongkong to advance Hongkong money to the passenger. The passenger then paid Travel-On upon his return to Manila and which payment would be credited by Travel-On to respondent's running account with it.In its decision dated 31 January 1975, the court a quo ordered Travel-On to pay private respondent the amount of P8,894.91 representing net overpayments by private respondent, moral damages of P10,000.00 for the wrongful issuance of the writ of attachment and for the filing of this case, P5,000.00 for attorney's fees and the costs of the suit.The trial court ruled that private respondent's indebtedness to petitioner was not satisfactorily established and that the postdated checks were issued not for the purpose of encashment to pay his indebtedness but to accommodate the General Manager of Travel-On to enable her to show to the Board of Directors that Travel-On was financially stable.Petitioner filed a motion for reconsideration that was, however, denied by the trial court, which in fact then increased the award of moral damages to P50,000.00. prLLOn appeal, the Court of Appeals affirmed the decision of the trial court, but reduced the award of moral damages to P20,000.00, with interest at the legal rate from the date of the filing of the Answer on 28 August 1972.Petitioner moved for reconsideration of the Court of Appeals' decision, without success.In the instant Petition for Review, it is urged that the postdated checks are per se evidence of liability on the part of private respondent. Petitioner further argues that even assuming that the checks were for accommodation, private respondent is still liable thereunder considering that petitioner is a holder for value.Both the trial and appellate courts had rejected the checks as evidence of indebtedness on the ground that the various statements of account prepared by petitioner did not show that private respondent had an outstanding balance of P115,000.00 which is the total amount of the checks he issued. It was pointed out that while the various exhibits of petitioner showed various accountabilities of private respondent, they did not satisfactorily establish the amount of the outstanding indebtedness of private respondent. The appellate court made much of the fact that the figures representing private respondent's unpaid accounts found in the "Schedule of Outstanding Account" dated 31 January 1970 did not tally with the figures found in the statement which showed private respondent's transactions with petitioner for the years 1969 and 1970; that there was no satisfactory explanation as to why the total outstanding amount of P278,432.74 was still used as basis in the accounting of 7 April 1972 considering that according to the table of transactions for the year 1969 and 1970, the total unpaid account of private respondent amounted to P239,794.57.We have, however, examined the record and it shows that the 7 April 1972 Statement of Account had simply not been updated; that if we use as basis the figure as of 31 January 1970 which is P278,432.74 and from it deduct P38,638.17 which represents some of the payments subsequently made by private respondent, the figure P239,794.57 will be obtained. LLjurAlso, the fact alone that the various statements of account had variances in figures, simply did not mean that private respondent had no more financial obligations to petitioner. It must be stressed that private respondent's account with petitioner was a running or open one, which explains the varying figures in each of the statements rendered as of a given date.The appellate court erred in considering only the statements of account in determining whether private respondent was indebted to petitioner under the checks. By doing so, it failed to give due importance to the most telling piece of evidence of private respondent's indebtedness the checks themselves which he had issued.Contrary to the view held by the Court of Appeals, this Court finds that the checks are the all important evidence of petitioner's case; that these checks clearly established private respondent's indebtedness to petitioner; that private respondent was liable thereunder.It is important to stress that a check which is regular on its face is deemed prima facie to have been issued for a valuable consideration and every person whose signature appears thereon is deemed to have become a party thereto for value. 1 Thus, the mere introduction of the instrument sued on in evidence prima facie entitles the plaintiff to recovery. Further, the rule is quite settled that a negotiable instrument is presumed to have been given or indorsed for a sufficient consideration unless otherwise contradicted and overcome by other competent evidence. 2 In the case at bar, the Court of Appeals, contrary to these established rules, placed the burden of proving the existence of valuable consideration upon petitioner. This cannot be countenanced; it was up to private respondent to show that he had indeed issued the checks without sufficient consideration. The Court considers that private respondent was unable to rebut satisfactorily this legal presumption. It must also be noted that those checks were issued immediately after a letter demanding payment had been sent to private respondent by petitioner Travel-On.The fact that all the checks issued by private respondent to petitioner were presented for payment by the latter would lead to no other conclusion than that these checks were intended for encashment. There is nothing in the checks themselves (or in any other document for that matter) that states otherwise.We are unable to accept the Court of Appeals' conclusion that the checks here involved were issued for "accommodation" and that accordingly private respondent maker of those checks was not liable thereon to petitioner payee of those checks.In the first place, while the Negotiable Instruments Law does refer to accommodation transactions, no such transaction was here shown. Section 29 of the Negotiable Instruments Law provides as follows:"Section 29.Liability of accommodation party. An accommodation party is one who has signed the instrument as maker, drawer, acceptor, or indorser, without receiving value therefor, and for the purpose of lending his name to some other person. Such a person is liable on the instrument to a holder for value, notwithstanding such holder, at the time of taking the instrument, knew him to be only an accommodation party.In accommodation transactions recognized by the Negotiable Instruments Law, an accommodating party lends his credit to the accommodated party, by issuing or indorsing a check which is held by a payee or indorsee as a holder in due course, who gave full value therefor to the accommodated party. The latter, in other words, receives or realizes full value which the accommodated party then must repay to the accommodating party, unless of course the accommodating party intended to make a donation to the accommodated party. But the accommodating party is bound on the check to the holder in due course who is necessarily a third party and is not the accommodated party. Having issued or indorsed the check, the accommodating party has warranted to the holder in due course that he will pay the same according to its tenor. 3 In the case at bar, Travel-On was payee of all six (6) checks; it presented these checks for payment at the drawee bank but the checks bounced. Travel-On obviously was not an accommodated party; it realized no value on the checks which bounced.Travel-On was entitled to the benefit of the statutory presumption that it was a holder in due course, 4 that the checks were supported by valuable consideration. 5 Private respondent maker of the checks did not successfully rebut these presumptions. The only evidence aliunde that private respondent offered was his own self-serving uncorroborated testimony. He claimed that he had issued the checks to Travel-On as payee to "accommodate" its General Manager who allegedly wished to show those checks to the Board of Directors of Travel-On to "prove" that Travel-On's account receivables were somehow "still good." It will be seen that this claim was in fact a claim that the checks were merely simulated, that private respondent did not intend to bind himself thereon. Only evidence of the clearest and most convincing kind will suffice for that purpose; 6 no such evidence was submitted by private respondent. The latter's explanation was denied by Travel-On's General Manager; that explanation, in any case, appears merely contrived and quite hollow to us. Upon the other hand, the "accommodation" or assistance extended to Travel-On's passengers abroad as testified by petitioner's General Manager involved, not the accommodation transactions recognized by the NIL, but rather the circumvention of then existing foreign exchange regulations by passengers booked by Travel-On, which incidentally involved receipt of full consideration by private respondent.Thus, we believe and so hold that private respondent must be held liable on the six (6) checks here involved. Those checks in themselves constituted evidence of indebtedness of private respondent, evidence not successfully overturned or rebutted by private respondent.Since the checks constitute the best evidence of private respondent's liability to petitioner Travel-On, the amount of such liability is the face amount of the checks, reduced only by the P10,000.00 which Travel-On admitted in its complaint to have been paid by private respondent sometime in March 1992.The award of moral damages to private respondent must be set aside, for the reason that petitioner's application for the writ of attachment rested on sufficient basis and no bad faith was shown on the part of Travel-On. If anyone was in bad faith, it was private respondent who issued bad checks and then pretended to have "accommodated" petitioner's General Manager by assisting her in a supposed scheme to deceive petitioner's Board of Directors and to misrepresent Travel-On's financial condition.ACCORDINGLY, the Court Resolved to GRANT due course to the Petition for Review on Certiorari and to REVERSE and SET ASIDE the Decision dated 22 October 1980 and the Resolution of 23 January 1981 of the Court of Appeals, as well as the Decision dated 31 January 1975 of the trial court, and to enter a new decision requiring private respondent Arturo S. Miranda to pay to petitioner Travel-On the amount of P105,000.00 With legal interest thereon from 14 June 1972, plus ten percent (10%) of the total amount due as attorney's fees. Costs against private respondent.Gutierrez, Jr., Bidin, Davide, Jr. and Romero, JJ ., concur.SECOND DIVISION[G.R. No. 117660. December 18, 2000.]AGRO CONGLOMERATES, INC. and MARIO SORIANO, petitioners, vs. THE HON. COURT OF APPEALS and REGENT SAVINGS and LOAN BANK, INC., respondents.Quiason Makalintal Barot Torres & Ibarra for petitioners.Atty. Cesar M. Cario for private respondent.SYNOPSISOn July 17, 1982, petitioner Agro Conglomerates, Inc. sold two parcels of farmland to Wonderland Food Industries, Inc. The parties executed a Memorandum of Agreement which provides that the P5 million as purchase price shall be paid as follows: P1million shall be paid in cash upon the signing of the agreement, P2 million worth of common shares of stock of Wonderland Food Industries, Inc., and the remaining P2 million shall be paid in four equal installments. On July 19, 1982, Agro Conglomerate, Inc. as vendor, Wonderland Food Industries as vendee, and the herein respondent Regent Savings and Loan Bank (formerly Summa Savings and Loan Association) executed as Addendum to the previous Memorandum of Agreement to the effect that the vendee authorized the vendor to obtain a loan from the respondent bank for the total amount of the initial payments and that the vendee undertook to assume the settlement of the said loan. Petitioner Mario Soriano signed several promissory notes and received the proceeds in behalf of Agro Conglomerates, Inc. However, the sale of the said farmland did not materialize which resulted to a rescission of contract of sale between the Agro Conglomerates, Inc. and Wonderland Food Industries, Inc. Subsequently, petitioners Agro Conglomerates, Inc. and Mario Soriano failed to meet their obligations as they fell due. Thus, after several opportunities given to petitioner to settle their accounts, the respondent bank filed three separate complaints for Collection of Sums of Money before the Regional Trial Court of Manila against the petitioners. In their answer, petitioners interposed the defense of novation and insisted that there was a valid substitution of debtor based on the executed addendum. After trial, the trial court rendered judgment in favor of the respondent bank. The Court of Appeals affirmed in toto the said judgment. Hence, this Petition.This Court ruled that there was no novation by "substitution" of debtor because there was no prior obligation which was substituted by a new contract. It will be noted that the promissory notes, which bound the petitioners to pay, were executed after the addendum. The addendum modified the contract of sale, not the stipulations in the promissory notes which pertain to the surety contract. At this instance, Wonderland apparently assured the payment of future debts to be incurred by the petitioners. Consequently, only a contract of surety arose. It was wrong for petitioners to presume a novation had taken place. The well-settled rule is that novation is never presumed, it must be clearly and unequivocally shown. As it turned out, the contract of surety between Wonderland and the petitioners was extinguished by the rescission of the contract of sale of the farmland. With the rescission, there was confusion or merger in the persons of the principal obligor and the surety, namely, the petitioners herein. The addendum which was dependent thereon likewise lost its efficacy.Moreover, it was admitted that petitioners received the proceeds of the promissory notes obtained from respondent bank. Petitioners had no legal or just ground to retain the proceeds of the loan at the expense of private respondent. Neither could petitioners excuse themselves and hold Wonderland still liable to pay the loan upon the rescission of their sales contract.Petition was DENIED.SYLLABUS1.CIVIL LAW; OBLIGATIONS AND CONTRACTS; SALES; RECIPROCAL TRANSACTION. A contract of sale is a reciprocal transaction. The obligation or promise of each party is the cause or consideration for the obligation or promise by the other. The vendee is obliged to pay the price, while the vendor must deliver actual possession of the land. AcHaTE2.ID.; ID.; ID.; SURETYSHIP; APPLIED IN CASE AT BAR. In the instant case the original plan was that the initial payments would be paid in cash. Subsequently, the parties (with the participation of respondent bank) executed an addendum providing instead, that the petitioners would secure a loan in the name of Agro Conglomerates Inc. for the total amount of the initial payments, while the settlement of said loan would be assumed by Wonderland. Thereafter, petitioner Soriano signed several promissory notes and received the proceeds in behalf of petitioner-company. By this time, we note a subsidiary contract of suretyship had taken effect since petitioners signed the promissory notes as maker and accommodation party for the benefit of Wonderland. Petitioners became liable as accommodation party.3.ID.; ID.; ID.; ELUCIDATED. Suretyship is defined as the relation which exists where one person has undertaken an obligation and another person is also under the obligation or other duty to the obligee, who is entitled to but one performance, and as between the two who are bound, one rather than the other should perform. The surety's liability to the creditor or promise of the principal is said to be direct, primary and absolute; in other words, he is directly and equally bound with the principal. And the creditor may proceed against any one of the solidary debtors.4.ID.; ID.; ID.; EXTINGUISHED BY RESCISSION OF CONTRACT OF SALE; CASE AT BAR. As it turned out, the contract of surety between Wonderland and the petitioners was extinguished by the rescission of the contract of sale of the farmland. With the rescission, there was confusion or merger in the persons of the principal obligor and the surety, namely the petitioners herein. The addendum which was dependent thereon likewise lost its efficacy. cEHSIC5.ID.; ID.; ACCOMMODATION PARTY; ELUCIDATED. An accommodation party is a person who has signed the instrument as maker, acceptor, or indorser, without receiving value therefor, and for the purpose of lending his name to some other person and is liable on the instrument to a holder for value, notwithstanding such holder at the time of taking the instrument knew (the signatory) to be an accommodation party. He has the right, after paying the holder, to obtain reimbursement from the party accommodated, since the relation between them has in effect become one of principal and surety, the accommodation party being the surety.6.ID.; ID.; EXTINGUISHMENT OF OBLIGATIONS; NOVATION; DEFINED. Novation is the extinguishment of an obligation by the substitution or change of the obligation by a subsequent one which extinguishes or modifies the first, either by changing the object or principal conditions, or by substituting another in place of the debtor, or by subrogating a third person in the rights of the creditor. In order that a novation can take place, the concurrence of the following requisites are indispensable: 1) There must be a previous valid obligation; 2) There must be an agreement of the parties concerned to a new contract; 3) There must be the extinguishment of the old contract; and 4) There must be the validity of the new contract.7.ID.; ID.; ID.; ID.; NOT PRESENT IN CASE AT BAR. In the instant case, the first requisite for a valid novation is lacking. There was no novation by "substitution" of debtor because there was no prior obligation which was substituted by a new contract. It will be noted that the promissory notes, which bound the petitioners to pay, were executed after the addendum. The addendum modified the contract of sale, not the stipulations in the promissory notes which pertain to the surety contract. At this instance, Wonderland apparently assured the payment of future debts to be incurred by the petitioners. Consequently, only a contract of surety arose. It was wrong for petitioners to presume a novation had taken place. The well-settled rule is that novation is never presumed, it must be clearly and unequivocally shown.8.ID.; ID.; INTERPRETATION OF CONTRACTS; TO JUDGE THE INTENTION OF PARTIES, THEIR CONTEMPORANEOUS AND SUBSEQUENT ACTS SHOULD BE CONSIDERED. It is true that the basic and fundamental rule in the interpretation of contract is that, if the terms thereof are clear and leave no doubt as to the intention of the contracting parties, the literal meaning shall control. However, in order to judge the intention of the parties, their contemporaneous and subsequent acts should be considered. IDEHCa9.ID.; ID.; SALES; RESCISSION; VENDOR HAD NO LEGAL OR JUST GROUND TO RETAIN THE PROCEEDS OF SALE. The contract of sale between Wonderland and petitioners did not materialize. But it was admitted that petitioners received the proceeds of the promissory notes obtained from respondent bank. Sec. 22 of the Civil Code provides: Every person who through an act of performance by another, or any other means, acquires or comes into possession of something at the expense of the latter without just or legal ground, shall return the same to him. Petitioners had no legal or just ground to retain the proceeds of the loan at the expense of private respondent. Neither could petitioners excuse themselves and hold Wonderland still liable to pay the loan upon the rescission of their sales contract. If petitioners sustained damages as a result of the rescission, they should have impleaded Wonderland and asked damages. The non-inclusion of a necessary party does not prevent the court from proceeding in the action, and the judgment rendered therein shall be without prejudice to the rights of such necessary party. But respondent appellate court did not err in holding that petitioners are duty-bound under the law to pay the claims of respondent bank from whom they had obtained the loan proceeds.D E C I S I O NQUISUMBING, J p:This is a petition for review challenging the decision 1 dated October 17, 1994 of the Court of Appeals in CA-G.R. No. 32933, which affirmed in toto the judgment of the Manila Regional Trial Court, Branch 27, in consolidated Cases Nos. 86-37374, 86-37388, 86-37543. SHIcDTThis petition springs from three complaints for sums of money filed by respondent bank against herein petitioners. In the decision of the Court of Appeals, petitioners were ordered to pay respondent bank, as follows:Wherefore, judgment is hereby rendered in favor of plaintiff and against defendants, as follows:1)In Civil Case No. 86-37374, defendants [petitioners, herein] are ordered jointly and severally, to pay to plaintiff the amount of P78,212.29, together with interest and service charge thereon, at the rates of 14% and 3% per annum, respectively, computed from November 10, 1982, until fully paid, plus stipulated penalty on unpaid principal at the rate of 6% per annum, computed from November 10, 1982, plus 15% as liquidated damage plus 10% of the total amount due, as attorney's fees, plus costs; HaTISE2)In Civil Case No. 86-37388, defendant is ordered to pay plaintiff the amount of P632,911.39, together with interest and service charge thereon at the rate of 14% and 3% per annum, respectively, computed from January 15, 1983, until fully paid, plus stipulated penalty on unpaid principal at the rate of 6% per annum, computed from January 15, 1983, plus liquidated damages equivalent to 15% of the total amount due, plus attorney's fees equivalent to 10% of the total amount due, plus costs; and3)In Civil Case No. 86-37543, defendant is ordered to pay plaintiff, on the first cause of action, the amount of P510,000.00, together with interest and service charge thereon, at the rates of 14% and 2% per annum, respectively, computed from March 13, 1983, until fully paid, plus a penalty of 6% per annum, based on the outstanding principal of the loan, computed from March 13, 1983, until fully paid; and on the second cause of action, the amount of P494,936.71, together with interest and service charge thereon at the rates of 14% and 2%, per annum, respectively, computed from March 30, 1983, until fully paid, plus a penalty charge of 6% per annum, based on the unpaid principal, computed from March 30, 1983, until fully paid, plus (on both causes of action) an amount equal to 15% of the total amounts due, as liquidated damages, plus attorney's fees equal to 10% of the total amounts due, plus costs. 2 Based on the records, the following are the factual antecedents.On July 17, 1982, petitioner Agro Conglomerates, Inc. as vendor, sold two parcels of land to Wonderland Food Industries, Inc. In their Memorandum of Agreement, 3 the parties covenanted that the purchase price of Five Million (P5,000,000.00) Pesos would be settled by the vendee, under the following terms and conditions: (1) One Million (P1,000,000.00) Pesos shall be paid in cash upon the signing of the agreement; (2) Two Million (P2,000,000.00) Pesos worth of common shares of stock of the Wonderland Food Industries, Inc.; and (3) The balance of P2,000,000.00 shall be paid in four equal installments, the first installment falling due, 180 days after the signing of the agreement and every six months thereafter, with an interest rate of 18% per annum, to be advanced by the vendee upon the signing of the agreement.On July 19, 1982, the vendor, the vendee, and the respondent bank Regent Savings & Loan Bank (formerly Summa Savings & Loan Association), executed an Addendum 4 to the previous Memorandum of Agreement. The new arrangement pertained to the revision of settlement of the initial payments of P1,000,000.00 and prepaid interest of P360,000.00 (18% of P2,000,000.00) as follows:Whereas, the parties have agreed to qualify the stipulated terms for the payment of the said ONE MILLION THREE HUNDRED SIXTY THOUSAND (P1,360,000.00) PESOS.WHEREFORE, in consideration of the mutual covenant and agreement of the parties, they do further covenant and agree as follows:1.That the VENDEE instead of paying the amount of ONE MILLION THREE HUNDRED SIXTY THOUSAND (P1,360,000.00) PESOS in cash, hereby authorizes the VENDOR to obtain a loan from Summa Savings and Loan Association with office address at Valenzuela, Metro Manila, being represented herein by its President, Mr. Jaime Cario and referred to hereafter as Financier, in the amount of ONE MILLION THREE HUNDRED SIXTY THOUSAND (P1,360,000.00) PESOS, plus interest thereon at such rate as the VENDEE and the Financier may agree, which amount shall cover the ONE MILLION (P1,000,000.00) PESOS cash which was agreed to be paid upon signing of the Memorandum of Agreement, plus 18% interest on the balance of two million pesos stipulated upon in Item No. 1(c) of the said agreement; provided however, that said loan shall be made for and in the name of the VENDOR. IDaEHS2.The VENDEE also agrees that the full amount of ONE MILLION THREE HUNDRED SIXTY THOUSAND (P1,360,000.00) PESOS be paid directly to the VENDOR; however, the VENDEE hereby undertakes to pay the full amount of the said loan to the Financier on such terms and conditions agreed upon by the Financier and the VENDOR, it being understood that while the loan will be secured from and in the name of the VENDOR, the VENDEE will be the one liable to pay the entire proceeds thereof including interest and other charges. 5 This addendum was not notarized.Consequently, petitioner Mario Soriano signed as maker several promissory notes, 6 payable to the respondent bank. Thereafter, the bank released the proceeds of the loan to petitioners. However, petitioners failed to meet their obligations as they fell due. During that time, the bank was experiencing financial turmoil and was under the supervision of the Central Bank. Central Bank examiner and liquidator Cordula de Jesus endorsed the subject promissory notes to the bank's counsel for collection. The bank gave petitioners opportunity to settle their account by extending payment due dates. Mario Soriano manifested his intention to re-structure the loan, yet did not show up nor submit his formal written request.Respondent bank filed three separate complaints before the Regional Trial Court of Manila for Collection of Sums of money. The corresponding case histories are illustrated in the table below:Date of LoanAmountPayment Due Payment ExtensionDateDates

Civil Case 86-37374P78,212.29Nov. 10, 1982Feb. 8, 1983August 12, 1982May 9, 1983Aug. 7, 1983

Civil Case 86-37388P632,911.39Jan. 15, 1983May 16, 1983July 19, 1982Aug. 14, 1983

Civil Case 86-37543P510,000.00March 13, 1983June 11, 1983September 14, 1982Sept. 9, 1983

October 1, 1982P494,936.71March 30, 1983June 28, 1983Sept. 26, 1983In their answer, petitioners interposed the defense of novation and insisted there was a valid substitution of debtor. They alleged that the addendum specifically states that although the promissory notes were in their names, Wonderland shall be responsible for the payment thereof.The trial court held that petitioners are liable, to wit:The evidences, however, disclose that Wonderland did not comply with its obligation under said 'Addendum' (Exh. 'S') as the agreement to turn over the farmland to it, did not materialize (57 tsn, May 29, 1990), and there was, actually no sale of the land (58 tsn, ibid). Hence, Wonderland is not answerable. And since the loans obtained under the four promissory notes (Exhs. 'A', 'C', 'G', and 'E') have not been paid, despite opportunities given by plaintiff to defendants to make payments, it stands to reason that defendants are liable to pay their obligations thereunder to plaintiff. In fact, defendants failed to file a third-party complaint against Wonderland, which shows the weakness of its stand that Wonderland is answerable to make said payments. 7 Petitioners appealed to the Court of Appeals. The trial court's decision was affirmed by the appellate court.Hence, this recourse, wherein petitioners raise the sole issue of:WHETHER THE COURT OF APPEALS ERRED IN NOT FINDING THAT THE ADDENDUM, SIGNED BY THE PETITIONERS, RESPONDENT BANK AND WONDERLAND INC., CONSTITUTES A NOVATION OF THE CONTRACT BY SUBSTITUTION OF DEBTOR, WHICH EXEMPTS THE PETITIONERS FROM ANY LIABILITY OVER THE PROMISSORY NOTES.Revealed by the facts on record, the conflict among the parties started from a contract of sale of a farmland between petitioners and Wonderland Food Industries, Inc. As found by the trial court, no such sale materialized.A contract of sale is a reciprocal transaction. The obligation or promise of each party is the cause or consideration for the obligation or promise by the other. The vendee is obliged to pay the price, while the vendor must deliver actual possession of the land. In the instant case the original plan was that the initial payments would be paid in cash. Subsequently, the parties (with the participation of respondent bank) executed an addendum providing instead, that the petitioners would secure a loan in the name of Agro Conglomerates Inc. for the total amount of the initial payments, while the settlement of said loan would be assumed by Wonderland. Thereafter, petitioner Soriano signed several promissory notes and received the proceeds in behalf of petitioner-company. cDAITSBy this time, we note a subsidiary contract of suretyship had taken effect since petitioners signed the promissory notes as maker and accommodation party for the benefit of Wonderland. Petitioners became liable as accommodation party. An accommodation party is a person who has signed the instrument as maker, acceptor, or indorser, without receiving value therefor, and for the purpose of lending his name to some other person and is liable on the instrument to a holder for value, notwithstanding such holder at the time of taking the instrument knew (the signatory) to be an accommodation party. 8 He has the right, after paying the holder, to obtain reimbursement from the party accommodated, since the relation between them has in effect become one of principal and surety, the accommodation party being the surety. 9 Suretyship is defined as the relation which exists where one person has undertaken an obligation and another person is also under the obligation or other duty to the obligee, who is entitled to but one performance, and as between the two who are bound, one rather than the other should perform. 10 The surety's liability to the creditor or promisee of the principal is said to be direct, primary and absolute; in other words, he is directly and equally bound with the principal. 11 And the creditor may proceed against any one of the solidary debtors. 12 We do not give credence to petitioners' assertion that, as provided by the addendum, their obligation to pay the promissory notes was novated by "substitution" of a new debtor, Wonderland. Contrary to petitioners' contention, the attendant facts herein do not make a case of novation.Novation is the extinguishment of an obligation by the substitution or change of the obligation by a subsequent one which extinguishes or modifies the first, either by changing the object or principal conditions, or by substituting another in place of the debtor, or by subrogating a third person in the rights of the creditor. 13 In order that a novation can take place, the concurrence of the following requisites 14 are indispensable:1)There must be a previous valid obligation;2)There must be an agreement of the parties concerned to a new contract;3)There must be the extinguishment of the old contract; and4)There must be the validity of the new contract.In the instant case, the first requisite for a valid novation is lacking. There was no novation by "substitution" of debtor because there was no prior obligation which was substituted by a new contract. It will be noted that the promissory notes, which bound the petitioners to pay, were executed after the addendum. The addendum modified the contract of sale, not the stipulations in the promissory notes which pertain to the surety contract. At this instance, Wonderland apparently assured the payment of future debts to be incurred by the petitioners. Consequently, only a contract of surety arose. It was wrong for petitioners to presume a novation had taken place. The well-settled rule is that novation is never presumed, 15 must be clearly and unequivocally shown. 16 As it turned out, the contract of surety between Wonderland and the petitioners was extinguished by the rescission of the contract of sale of the farmland. With the rescission, there was confusion or merger in the persons of the principal obligor and the surety, namely the petitioners herein. The addendum which was dependent thereon likewise lost its efficacy.It is true that the basic and fundamental rule in the interpretation of contract is that, if the terms thereof are clear and leave no doubt as to the intention of the contracting parties, the literal meaning shall control. However, in order to judge the intention of the parties, their contemporaneous and subsequent acts should be considered. 17 The contract of sale between Wonderland and petitioners did not materialize. But it was admitted that petitioners received the proceeds of the promissory notes obtained from respondent bank. CTEaDcSec. 22 of the Civil Code provides:Every person who through an act of performance by another, or any other means, acquires or comes into possession of something at the expense of the latter without just or legal ground, shall return the same to him.Petitioners had no legal or just ground to retain the proceeds of the loan at the expense of private respondent. Neither could petitioners excuse themselves and hold Wonderland still liable to pay the loan upon the rescission of their sales contract. If petitioners sustained damages as a result of the rescission, they should have impleaded Wonderland and asked damages. The non-inclusion of a necessary part does not prevent the court from proceeding in the action, and the judgment rendered therein shall be without prejudice to the rights of such necessary party. 18 But respondent appellate court did not err in holding that petitioners are duty-bound under the law to pay the claims of respondent bank from whom they had obtained the loan proceeds.WHEREFORE, the petition is DENIED for lack of merit. The assailed decision of the Court of Appeals dated October 17, 1994 is AFFIRMED. Costs against petitioners. STaIHcSO ORDERED.Bellosillo, Mendoza, Buena and De Leon, Jr., JJ., concur.SECOND DIVISION[G.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 partnership Concepcion & Tamayo Construction Company, JOSE TORIBIO, Atty.-in-Fact of Concepcion & Tamayo Construction Company, and THE DISTRICT ENGINEER, Puerto Princesa, Palawan, respondents.Fernando R. Mangubat, Jr. for respondent PNB.D E C I S I O NGUTIERREZ, JR., J p:This is a petition for review seeking to annul and set aside the decision of the Court of Appeals, now the Intermediate Appellate Court, affirming the order of the trial court which dismissed the petitioners' complaint for cancellation of their real estate mortgage and held them jointly and severally liable with the principal debtors on a promissory note which they signed as accommodation makers.The factual background of this case is stated in the decision of the appellate court:"Appellants are the registered owners of a parcel of land located in Sampaloc, Manila, and covered by T.C.T. 35161 of the Register of Deeds of Manila. On October 7, 1954, this property was mortgaged by the appellants to the Philippine National Bank, hereinafter called PNB, to guarantee a loan of P1,000.00 extended to one Domingo Prudencio."Sometime in 1955, the Concepcion & Tamayo Construction Company, hereinafter called Company, had a pending contract with the Bureau of Public Works, hereinafter called the Bureau, for the construction of the municipal building in Puerto Princesa, Palawan, in the amount of P36,800.00 and, as said Company needed funds for said construction, Jose Toribio, appellants' relative, and attorney-in-fact of the Company, approached the appellants asking them to mortgage their property to secure the loan of P10,000.00 which the Company was negotiating with the PNB."After some persuasion appellants signed on December 23, 1955 the 'Amendment of Real Estate Mortgage', mortgaging their said property to the PNB to guaranty the loan of P10,000.00 extended to the Company. The terms and conditions of the original mortgage for P1,000.00 were made integral part of the new mortgage for P10,000.00 and both documents were registered with the Register of Deeds of Manila. The promissory note covering the loan of P10,000.00 dated December 29, 1955, maturing on April 27, 1956, was signed by Jose Toribio, as attorney-in-fact of the Company, and by the appellants. Appellants also signed the portion of the promissory note indicating that they are requesting the PNB to issue the Check covering the loan to the Company. On the same date (December 23, 1955) that the 'Amendment of Real Estate' was executed, Jose Toribio, in the same capacity as attorney-in-fact of the Company, executed also the 'Deed of Assignment' assigning all payments to be made by the Bureau to the Company on account of the contract for the construction of the Puerto Princesa building in favor of the PNB."This assignment of credit to the contrary notwithstanding, the Bureau, with approval, of the PNB, conditioned, however that they should be for labor and materials, made three payments to the Company on account of the contract price totalling P11,234.40. The Bureau's last request for P5,000.00 on June 20, 1956, however, was denied by the PNB for the reason that since the loan was already overdue as of April 28, 1956) the remaining balance of the contract price should be applied to the loan."The Company abandoned the work, as a consequence of which on June 30, 1956, the Bureau rescinded the construction contract and assumed the work of completing the building. On November 14. 1958, appellants wrote the PNB contending that since the PNB authorized payments to the Company instead of on account of the loan guaranteed by the mortgage there was a change in the conditions of the contract without the knowledge of appellants, which entitled the latter to a cancellation of their mortgage contract."Failing in their bid to have the real estate mortgage cancelled, appellants filed on June 27, 1959 this action against the PNB, the Company, the latter's attorney-in-fact Jose Toribio, and the District Engineer of Puerto Princesa, Palawan, seeking the cancellation of their real estate mortgage. The complaint was amended to exclude the Company as defendant, it having been shown that its life as a partnership had already expired and, in lieu thereof, Ramon Concepcion and Manuel M. Tamayo, partners of the defunct Company, were impleaded in their private capacity as defendants."After hearing, the trial court rendered judgment, denying the prayer in the complaint that the petitioners be absolved from their obligation under the mortgage contract and that the said mortgage be released or cancelled. The petitioners were ordered to pay jointly and severally with their co-makers Ramon C. Concepcion and Manuel M. Tamayo the sum of P11,900.19 with interest at the rate of 6% per annum from the date of the filing of the complaint on June 27, 1959 until fully paid and P1,000.00 attorney's fees.The decision also provided that if the judgment was not satisfied within 90 days from its receipt, the mortgaged properties together with all the improvements thereon belonging to the petitioners would be sold at public auction and applied to the judgment debt.The Court of Appeals affirmed the trial court's decision in toto stating that, as accommodation makers, the petitioners' liability is that of solidary co-makers and that since "the amounts released to the construction company were used therein and, therefore, were spent for the successful accomplishment of the work constructed for, the authorization made by the Philippine National Bank of partial payments to the construction company which was also one of the solidary debtors cannot constitute a valid defense on the part of the other solidary debtors. Moreover, those who rendered services and furnished materials in the construction are preferred creditors and have a lien on the price of the contract." The appellate court further held that PNB had no obligation whatsoever to notify the petitioners of its authorizing the three payments in the total amount of P11,234.00 in favor of the Company because aside from the fact that the petitioners were not parties to the deed of assignment, there was no stipulation in said deed making it obligatory on the part of the PNB to notify the petitioners everytime it authorizes payment to the Company. It ruled that the petitioners cannot ask to be released from the real estate mortgage.In this petition, the petitioners raise the following issues which they present in the form of errors:I.First Assignment of Error.THE HONORABLE COURT OF APPEALS ERRED IN HOLDING THAT HEREIN PETITIONERS WERE SOLIDARY CO-DEBTORS INSTEAD OF SURETIES:II.Second Assignment of Error.THE HONORABLE COURT OF APPEALS ERRED IN HOLDING THAT PETITIONERS WERE NOT RELEASED FROM THEIR OBLIGATION TO THE RESPONDENT PNB, WHEN THE PNB, WITHOUT THE KNOWLEDGE AND CONSENT OF PETITIONERS, CHANGED THE TENOR AND CONDITION OF THE ASSIGNMENT OF PAYMENTS MADE BY THE PRINCIPAL DEBTOR; CONCEPCION & TAMAYO CONSTRUCTION COMPANY; AND RELEASED TO SUCH PRINCIPAL DEBTOR PAYMENTS FROM THE BUREAU OF PUBLIC WORKS WHICH WERE MORE THAN ENOUGH TO WIPE OUT THE INDEBTEDNESS TO THE PNB.The petitioners contend that as accommodation makers, the nature of their liability is only that of mere sureties instead of solidary co-debtors such that "a material alteration in the principal contract, effected by the creditor without the knowledge and consent of the sureties, completely discharges the sureties from all liability on the contract of suretyship." They state that when respondent PNB did not apply the initial and subsequent payments to the petitioners' debt as provided for in the deed of assignment, they were released from their obligation as sureties and, therefore, the real estate mortgage executed by them should have been cancelled.Section 29 of the Negotiable Instrument Law provides:"Liability of accommodation party. An accommodation party is one who has signed the instrument as maker, drawer, acceptor, or indorser, without receiving value therefor, and for the purpose of lending his name to some other person. Such a person is liable on the instrument to a holder for value, notwithstanding such holder at the time of taking the instrument knew him to be only an accommodation party."In the case of Philippine Bank of Commerce v. Aruego (102 SCRA 530, 539), we held that ". . . in lending his name to the accommodated party, the accommodation party is in effect a surety. . . ." However, unlike in a contract of suretyship, the liability of the accommodation party remains not only primary but also unconditional to a holder for value such that even if the accommodated party receives an extension of the period for payment without the consent of the accommodation party, the latter is still liable for the whole obligation and such extension does not release him because as far as a holder for value is concerned, he is a solidary co-debtor.Expounding on the nature of the liability of an accommodation party under the aforequoted section, we ruled in Ang Tiong v. Ting (22 SCRA 713, 716):"3.That the appellant, again assuming him to be an accommodation indorser, may obtain security from the maker to protect himself against the danger of insolvency of the latter, cannot in any manner affect his liability to the appellee, as the said remedy is a matter of concern exclusively between accommodation indorser and accommodated party. So that the appellant stands only as a surety in relation to the maker, granting this to be true for the sake of argument, is immaterial to the claim of the appellee, and does not a whit diminish nor defeat the rights of the latter who is a holder for value. The liability of the appellant remains primary and unconditional. To sanction the appellant's theory is to give unwarranted legal recognition to the patent absurdity of a situation where an indorser, when sued on an instrument by a holder in due course and for value, can escape liability on his indorsement by the convenient expedient of interposing the defense that he is a mere accommodation indorser."There is, therefore, no question that as accommodation makers, petitioners would be primarily and unconditionally liable on the promissory note to a holder for value, regardless of whether they stand as sureties or solidary co-debtors since such distinction would be entirely immaterial and inconsequential as far as a holder for value is concerned. Consequently, the petitioners cannot claim to have been released from their obligation simply because the time of payment of such obligation was temporarily deferred by PNB without their knowledge and consent. There has to be another basis for their claim of having been freed from their obligation. The question which should be resolved in this instant petition, therefore, is whether or not PNB can be considered a holder for value under Section 29 of the Negotiable Instruments Law such that the petitioners must be necessarily barred from setting up the defense of want of consideration or some other personal defenses which may be set up against a party who is not a holder in due course.A holder for value under Section 29 of the Negotiable Instruments Law is one who must meet all the requirements of a holder in due course under Section 52 of the same law except notice of want of consideration. (Agbayani, Commercial Laws of the Philippines, 1964, p. 208). If he does not qualify as a holder in due course then he holds the instrument subject to the same defenses as if it were non-negotiable (Section 58, Negotiable Instruments Law).In the case at bar, can PNB, the payee of the promissory note be considered a holder in due course?Petitioners contend that the payee PNB is an immediate party and, therefore, is not a holder in due course and stands on no better footing than a mere assignee.In those cases where a payee was considered a holder in due course, such payee either acquired the note from another holder or has not directly dealt with the maker thereof. As was held in the case of Bank of Commerce and Savings v. Randell (186 NorthWestern Reporter 71):"We conclude, therefore, that a payee who receives a negotiable promissory note, in good faith, for value, before maturity, and without any notice of any infirmity, from a holder, not the maker, to whom it was negotiated as a completed instrument, is a holder in due course within the purview of a Negotiable Instruments law, so as to preclude the defense of fraud and failure of consideration between the maker and the holder to whom the instrument, was delivered."Similarly, in the case of Stone v. Goldberg & Lewis (60 Southern Reporter 748) on rehearing and quoting Daniel on Negotiable Instruments, it was held:"It is a general principle of the law merchant that, as between the immediate parties to a negotiable instrument the parties between whom there is a privity the consideration may be inquired into; and as to them the only superiority of a bill or note over other unsealed evidence of debt is that it prima facie imports a consideration."Although as a general rule, a payee may be considered a holder in due course we think that such a rule cannot apply with respect to the respondent PNB. Not only was PNB an immediate party or in privy to the promissory note, that is, it had dealt directly with the petitioners knowing fully well that the latter only signed as accommodation makers but more important, it was the Deed of Assignment executed by the Construction Company in favor of PNB which principally moved the petitioners to sign the promissory note also in favor of PNB. Petitioners were made to believe and on that belief entered into the agreement that no other conditions would alter the terms thereof and yet, PNB altered the same. The Deed of Assignment specifically provided that Jose F. Toribio, on behalf of the Company, "have assigned, transferred and conveyed and by these presents, do assign, transfer and convey unto the said Philippine National Bank, its successors and assigns all payments to be received from the Bureau of Public Works on account of contract for the construction of the Puerto Princesa Municipal Building in Palawan, involving the total amount of P36,000.00" and that "This assignment shall be irrevocable and subject to the terms and conditions of the promissory note and or any other kind of documents which the Philippine National Bank have required or may require the assignor to execute to evidence the above-mentioned obligation."Under the terms of the above Deed, it is clear that there are no further conditions which could possibly alter the agreement without the consent of the petitioners such as the grant of greater priority to obligations other than the payment of the loan due to the PNB and part of which loan was guaranteed by the petitioners in the amount of P10,000.00.This, notwithstanding, PNB approved the Bureau's release of three payments directly to the Company instead of paying the same to the Bank. This approval was in violation of the Deed of Assignment and without any notice to the petitioners who stood to lose their property once the promissory note falls due without the same having been paid because the PNB, in effect, waived payments of the first three releases. From the foregoing circumstances, PNB can not be regarded as having acted in good faith which is also one of the requisites of a holder in due course under Section 52 of the Negotiable Instruments Law. The PNB knew that the promissory note which it took from the accommodation makers was signed by the latter because of full reliance on the Deed of Assignment, which, PNB had no intention to comply with strictly. Worse, the third payment to the Company in the amount of P4,293.60 was approved by PNB although the promissory note was almost a month overdue, an act which is clearly detrimental to the petitioners.We, therefore, hold that respondent PNB is not a holder in due course. Thus, the petitioners can validly set up their personal defense of release from the real estate mortgage against PNB. The latter, in authorizing the third payment to the Company after the promissory note became due, in effect, extended the term of the payment of the note without the consent of the accommodation makers who stand as sureties to the accommodated party and to all other parties who are not holders in due course or who do not derive their right from the same, including PNB.It may be argued that the Prudencios could have mortgaged their property even without the promissory note. The records show, however, that they would not have mortgaged the lot were it not for the sake of the Company whose attorney-in-fact was their relative. The spouses did not need the money for themselves.The attorney-in-fact tried twice to convince the Prudencios to mortgage their property in order to secure a loan in favor of the Company but the Prudencios refused. It was only when the deed of assignment was shown to the spouses that they consented to the mortgage and signed the promissory note in the Bank's favor.Article 2085 of the Civil Code enumerates the requisites of a valid mortgage contract. Petitioners do not dispute the validity of the mortgage. They only want to have it cancelled because the Bank violated the deed of assignment and extended the period of time of payment of the promissory note without the petitioners' consent and to the latter's detriment.The mortgage cannot be separated from the promissory note for it is the latter which is the basis of determining whether the mortgage should be foreclosed or cancelled. Without the promissory note which determines the amount of indebtedness there would have been no basis for the mortgage.True, if the Bank had not been the assignee, then the petitioners would be obliged to pay the Bank as their creditor on the promissory note, irrespective of whether or not the deed of assignment had been violated. However, the assignee and the creditor in this case are one and the same the Bank itself. When the Bank violated the deed of assignment, it prejudiced itself because its very violation was the reason why it was not paid on time in its capacity as creditor in the promissory note. It would be unfair to make the petitioners now answer for the debt or to foreclose on their property.Neither can PNB justify its acts on the ground that the Bureau of Public Works approved the deed of assignment with the condition that the wages of laborers and materials needed in the construction work must take precedence over the payment of the promissory note. In the first place, PNB did not need the approval of the Bureau. But even if it did, it should have informed the petitioners about the amendment of the deed of assignment. Secondly, the wages and materials have already been paid. That issue is academic. What is in dispute is who should bear the loss in this case. As between the petitioners and the Bank, the law and the equities of the case favor the petitioners. And thirdly, the wages and materials constitute a lien only on the constructed building but do not enjoy preference over the loan unless there is a liquidation proceeding such as in insolvency or settlement of estate. (See Philippine Savings Bank v. Lantin, 124 SCRA 476). There were remedies available at the time if the laborers and the creditors had not been paid. The fact is, they have been paid. Hence when the PNB accepted the condition imposed by the Bureau without the knowledge or consent of the petitioners, it amended the deed of assignment which, as stated earlier, was the principal reason why the petitioners consented to become accommodation makers.WHEREFORE, the petition is GRANTED. The decision of the Court of Appeals affirming the decision of the trial court is hereby REVERSED and SET ASIDE and a new one entered absolving the petitioners from liability on the promissory note and under the mortgage contract. The Philippine National Bank is ordered to release the real estate mortgage constituted on the property of the petitioners and to pay the amount of THREE THOUSAND PESOS (P3,000.00) as attorney's fees.SO ORDERED.Feria (Chairman), Fernan, Alampay and Paras, JJ., concur.FIRST DIVISION[G.R. No. L-30910. February 27, 1987.]PEOPLE OF THE PHILIPPINES, plaintiff-appellee, vs. JULIA MANIEGO, accused-appellant.SYLLABUS1.CIVIL LAW; DAMAGES; A PERSON ACQUITTED OF A CRIME MAY STILL BE HELD CIVILLY LIABLE. Well known is the principle that "any person criminally liable for felony is also civilly liable". But a person's acquittal of a crime on the ground that his guilt has not been proven beyond reasonable doubt does not bar a civil action for damages founded on the same acts involved in the offense. "Extinction of the penal action does not carry with it extinction of the civil, unless the extinction proceeds from a declaration in a final judgment that the fact from which the civil might arise did not exist."2.ID.; ID.; ID.; CASE AT BAR. Contrary to her submission, Maniego's acquittal on reasonable doubt of the crime of Malversation imputed to her and her two (2) co-accused did not operate to absolve her from civil liability for reimbursement of the amount rightfully due to the Government as owner thereof. Her liability thereof could properly be adjudged, as it was so adjudged, by the Trial Court on the basis of the evidence before it which adequately established that she was an indorser of several checks drawn by her sister, which were dishonored after they had been exchanged with cash belonging to the Government, then in the official custody of Lt. Ubay.3.MERCANTILE LAW; NEGOTIABLE INSTRUMENTS; CHECKS; LAST INDORSEE HAS THE RIGHT TO ENFORCE FULL PAYMENT OF THE INSTRUMENT AGAINST ALL PARTIES LIABLE THEREON. Appellant's contention that as a mere indorser, she may not be made liable on account of the dishonor of the checks indorsed by her, is likewise untenable. Under the law, the holder or last indorsee of a negotiable instrument has the right to "enforce payment of the instrument for the full amount thereof against all parties liable thereon." Among the "parties liable thereon" is an indorser of the instrument i.e., "a person placing his signature upon an instrument otherwise than as maker, drawer, or acceptor unless he clearly indicates by appropriate words his intention to be bound in some other capacity." Such an indorser "who indorses without qualification," inter alia "engages that on due presentment, (the instrument) shall be accepted or paid, or both, as the case may be, according to its tenor, and that if it be dishonored, and the necessary proceedings on dishonor be duly taken, he will pay the amount thereof to the holder, or to any subsequent indorser who may be compelled to pay it."4.ID.; ACCOMMODATION PARTY; LIABLE ON THE INSTRUMENT TO A HOLDER FOR VALUE. Maniego may also be deemed an " ACCOMMODATION party" in the light of the facts, i.e., a person "who has signed the instrument as maker, drawer, acceptor or indorser, without receiving value therefor, and for the purpose of lending his name to some other person." As such, she is under the law "liable on the instrument to a holder for value, notwithstanding such holder at the time of taking the instrument knew (her) to be only an ACCOMMODATION party," although she has the right, after paying the holder, to obtain reimbursement from the party accommodated, "since the relation between them is in effect that of principal and surety, the ACCOMMODATION party being the surety."5.CRIMINAL LAW; ACTION; CIVIL LIABILITY MAY BE ADJUDGED IN THE SAME CRIMINAL ACTION DISPENSING WITH THE NECESSITY OF A SEPARATE CIVIL ACTION. The Trial Court acted correctly in adjudging Maniego to be civilly liable in the same criminal action in which she had been acquitted of the felony of Malversation ascribed to her, dispensing with the necessity of having a separate civil action subsequently instituted against her for the purpose.D E C I S I O NNARVASA, J p:Application of the established rule in this jurisdiction, that the acquittal of an accused on reasonable doubt is not generally an impediment to the imposition, in the same criminal action, of civil liability for damages on said accused, is what is essentially called into question by the appellant in this case. CdprThe information which initiated the instant criminal proceedings in the Court of First Instance of Rizal indicted three (3) persons Lt. Rizalino M. Ubay, Mrs. Milagros Pamintuan, and Mrs. Julia T. Maniego for the crime of MALVERSATION committed as follows:"That on or about the period covering the month of May, 1957 up to and including the month of August, 1957, in Quezon City, Philippines, the above-named accused, conspiring together, confederating with and helping one another, with intent of gain and without authority of law, did, then and there, wilfully, unlawfully and feloniously malverse, misappropriate and misapply public funds in the amount of P66,434.50 belonging to the Republic of the Philippines, in the following manner, to wit: the accused, Lt. RIZALINO M. Ubay, a duly appointed officer in the Armed Forces of the Philippines in active duty, who, during the period specified above, was designated as Disbursing Officer in the Officer of the Chief of Finance, GHQ, Camp Murphy, Quezon City, and as such was entrusted with and had under his custody and control public funds, conspiring and confederating with his co-accused, MILAGROS T. PAMINTUAN and JULIA T. MANIEGO, did then and there, unlawfully, willfully and feloniously, with intent of gain and without authority of law, and in pursuance of their conspiracy, take, receive, and accept from his said co-accused several personal checks drawn against the Philippine National Bank and the Bank of the Philippine Islands, of which the accused, MILAGROS T. PAMINTUAN is the drawer and the accused, JULIA T. MANIEGO, is the indorser, in the total amount of P66,434.50, cashing said checks and using for this purpose the public funds entrusted to and placed under the custody and control of the said Lt. Rizalino M. Ubay, all the said accused knowing fully well that the said checks are worthless and are not covered by funds in the aforementioned banks, for which reason the same were dishonored and rejected by the said banks when presented for encashment, to the damage and prejudice of the Republic of the Philippines, in the amount of P66,434.50, Philippine currency." 1Only Lt. Ubay and Mrs. Maniego were arraigned, Mrs. Pamintuan having apparently fled to the United States in August, 1962. 2 Both Ubay and Maniego entered a plea of not guilty. 3After trial judgment was rendered by the Court of First Instance, 4 the dispositive part whereof reads: prLL"There being sufficient evidence beyond reasonable doubt against the accused, Rizalino M. Ubay, the Court hereby convicts him of the crime of malversation and sentences him to suffer the penalty of reclusion temporal of TWELVE (12) YEARS, ONE (1) DAY to FOURTEEN (14) YEARS, EIGHT (8) MONTHS, and a fine of P57,434.50 which is the amount malversed, and to suffer perpetual special disqualification."In the absence of evidence against accused Julia T. Maniego, the Court hereby acquits her, but both she and Rizal T. Ubay are hereby ordered to pay jointly and severally the amount of P57,434.50 to the government." 5Maniego sought reconsideration of the judgment, praying that she be absolved from civil liability or, at the very least, that her liability be reduced to P46,934.50. 6 The Court declined to negate her civil liability, but did reduce the amount thereof to P46,934.50. 7 She appealed to the Court of Appeals 8 as Ubay had earlier done. 9Ubay's appeal was subsequently dismissed by th