TOWN SAVINGS AND LOAN BANK, INC. PETITIONER, VS. THE COURT OF APPEALS, SPOUSES MIGUELITO HIPOLITO AND ALICIA N. HIPOLITO, RESPONDENTS.

This is a petition for review on certiorari to set aside
the decision dated March 12, 1992, of the Court of Appeals in CA-G.R. CV No.
29475 entitled, “Town Savings and Loan Bank, Inc. vs. Spouses Miguel
Hipolito and Alicia N. Hipolito” reversing the decision dated Septem­ber
14, 1990 of the Regional Trial Court of Bulacan which declared that the
Hipolitos were accommodation parties on the promissory note and holding them
liable to pay Town Savings And Loan Bank the sum of P1,392,600.00.

On or about May 4, 1983, the Hipolitos applied for, and were
granted, a loan in the amount of P700,000.00 with interest of 24% per annum for
which they executed and delivered to Town Savings and Loan Bank (or TSLB) a
promissory note with a maturity period of three (3) years and an acceleration
clause upon default in the payment of any amortization, plus a penalty of 36%
and 10% attorney’s fees, if the note were referred to an attorney for
collection. For failure to keep current
their monthly payments on the account, the obligors were deemed to have
defaulted on May 24, 1984. Notices of
past due account and demands for payment were sent but ignored. At the time of the institution of the action
on March 12, 1986, the unpaid obligation amounted to P1,114,983.40.

The Hipolitos denied being personally liable on the P700,000.00
promissory note which they executed. The loan was allegedly for the account of Pilarita H. Reyes, the sister
of Miguel Hipolito. She was the real
party-in-interest. The Hipolitos, not
having received any part of the loan, were mere guarantors for Pilarita. They allegedly signed the promissory note
because they were persuaded to do so by Joey Santos, President of TSLB. When they received the demand letters, they
confronted him but they were told that the Bank had to observe the formality of
sending notices and demand letters. The
real purpose was only to pressure Pilarita to comply with her undertaking.

Insisting that they were mere guarantors, the Hipolitos
vehemently protested against being dragged into the litigation as principal
parties. As a result of the unfounded suit, they allegedly
incurred actual damages estimated at P200,000.00 and attorney’s fees of
P30,000.00.

In a decision dated September 14, 1990, Judge Zotico A. Toleto of
the RTC of Malolos, Branch 18, held the respondents (then defendants) spouses
Miguel and Alicia Hipolito, liable as accommodation parties on the promissory
note.

The spouses appealed to the Court of Appeals. In a decision dated March 12, 1992, the
Court of Appeals found that the Hipolitos did not accommodate Pilarita but the
TSLB, whose lending authority was restricted by the size of its loan portfolio. The Hipolitos were relieved from any liability to TSLB.

Hence, this petition for review by TSLB.

The lone issue in this case is whether the Hipoli­tos are liable
on the promissory note which they exe­cuted in favor of the petitioner.

We hold for the petitioner.

“An accommodation party is one who has signed the instrument
as maker, drawer, indorser, without receiving value therefor and for the
purpose of lending his name to some other person. Such person is liable on the instrument to a holder for value,
notwithstanding such holder, at the time of the taking of the instrument knew
him to be only an accommodation party. In lending his name to the accommodated party, the accommodation party
is in effect a surety for the latter. He lends his name to enable the accommodated party to obtain credit or
to raise money. He receives
no part of the consideration for the
instrument but assumes liability to the
other parties thereto because he wants
to accommodate another.” (The Phil. Bank of Commerce
vs. Aruego, 102 SCRA 530, 539, 540.)

In this case, there is no question that the private respondents
signed the promissory note in order to enable Pilarita H. Reyes, who is Miguel
Hipolito’s sister, to borrow the total sum of P1.4 million from TSLB. As observed by both the trial court and the
appellate court, the actual beneficiary of the loan was Pilarita H. Reyes and
no other. The Hipolitos accommodated
her by signing a promissory note for half of the loan that she applied for
because TSLB may not lend any single borrower more than the authorized limit of
its loan portfolio. Under Section 29 of the Negotiable
Instruments Law, the Hipolitos are liable to the bank on the promissory note
that they signed to accommodate Pilarita.

Respondent appellate court erred in giving cre­dence to
Hipolito’s allegation that it was the bank’s president who induced him to sign
the promissory note so that the bank would not violate the Central Bank’s
regulation limiting the amount that TSLB could lend out. Besides being self-serving, Hipolito’s
testimony was uncorroborated by any
other evidence on record, therefore, it should have been received with extreme caution. The Court is convinced that the intention of
respondents Hipolitos in signing the promissory note was not so much to enable
the Bank to grant a loan to Pilarita but for the latter to be able to obtain
the full amount of the loan that she needed at the time.

It is not credible that a Bank would want so much to lend money
to a borrower that it would go out of its way to convince another person
(respondent Miguel Hipolito) to accommodate the borrower (Pilarita H.
Reyes). In the ordinary course of
things, the borrower, Pilarita, not the Bank, would have requested her brother
Miguel to accommodate her so she could have the P1.4 million that she wanted to
borrow from the Bank.

The case of Maulini vs. Serrano (28 Phil. 640), relied upon by
the appellate court in reversing the decision of the trial court, is not
applicable to this case. In that case,
the evidence showed that the indorser (the loan broker Serrano) in making the
indorsement to the lender, Maulini, was acting as agent for the latter or, as a mere vehicle for the transfer­ence
of the naked title from the borrower or maker of the note (Moreno). Furthermore, his indorsement was wholly
without consideration. We ruled that
Serrano was not an accommodation indorser; he was not liable on the note.

“x x x Where, however, an indorsement is made as a favor to
the indorsee, who requests it, not the better to secure payment, but to relieve
himself from a distasteful situation, and where the only consideration for such
indorsement passes from the indorser to the indorsee, the situation does not
present one creating an accommodation indorsement, nor one where there is a
consideration sufficient to sustain an action on the indorsement.” (p.
644.)

Unlike the Maulini case, there was no agreement here, written or
verbal, that in signing the promissory note, Miguel and Alicia Hipolito were
acting as agents for the money lender, the Bank. The consideration of the note signed by the Hipolitos was
received by them through Pilarita. They
acted as agents of Pilarita, not of the bank. They signed the promissory note as a favor to Pilarita, to help her
raise the funds that she needed. It was
Pilarita whom they accommodated, not the
bank, contrary to the erroneous finding of the appellate court.

WHEREFORE, the petition for review is GRANTED. The appealed decision of the Court of
Appeals is hereby REVERSED and that of the trial court is REINSTATED. Costs against the private respondents.

SO ORDERED.

Cruz, (Chairman), Bellosillo, and
Quiason, JJ., concur.