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[No. 8844. December 16, 1914.] The facts are stated in the opinion of the court.

FERNANDO MAULINI ET AL., plaintiffs and appellees, -vs. R. M. Calvo for appellant.
ANTONIO G. SERRANO, defendant and appellant.
Jose Arnaiz for appellees.
1.BlLLS AND NOTES; PAROL EVIDENCE AS TO CONSIDERATION
MORELAND, J.:
OF INDORSEMENT.—Parol evidence is admissible to show that an
indorsement was made wholly without consideration and, that in
making it, the indorser acted as agent for the indorsee and as a
mere vehicle for the transfer of the naked title from the maker to This is an appeal from a judgment of the Court of First Instance
the indorsee. of the city of Manila in favor of the plaintiff for the sum of
P3,000, with interest thereon at the rate of 1 ½ per cent per
2.ID.; ACCOMMODATION PARTY.—An aceommodation party is month from September 5, 1912, together with the costs.
one who has signed the ihstrument as maker, drawer, acceptor
or indorser without receiving value therefor and for the purpose The action was brought by the plaintiff upon the contract of
of leriding his name to some other person. indorsement alleged to have been made in his favor by the
defendant upon the following promissory note:
3.ID.; ACCOMMODATION NOTE.—An accommodation note is one
to which the accommodating party has put his name without "P3,000.
consideration for the purpose of accommodating some other Due
party who is to use it and is expected to pay it. 5th of September, 1912.

4.CONTRACTS; PAROL EVIDENCE.—The prohibition against the

introduction of parol evidence contained in section 285 of the
"We jointly and severally agree to pay to the order of Don
Code of Civil Procedure was designed to prevent alteration,
Antonio G. Serrano on or before the 5th day of September,
change, modification, variation or contraction of the terms of a
1912, the sum of three thousand pesos (P3,000) for value
written instrument admittedly existing except in cases
received for commercial operations. Notice and protest
specifically named therein. The prohibition does not apply where
renounced. If the sum herein mentioned is not completely paid
the purpose of the parol evidence is to show that no written
on the 5th day of September, 1912, this instrument will draw
contract ever existed, that the minds of the parties never met on
interest at the rate of 1J per cent per month from the date when
the terms of such a contract, that they never mutually agreed to
due until the date of its complete payinent. The makers hereof
enter into such a contract, and that there never existed any
agree to pay the additional sum of P500 as attorney's fees in
consideration upon which such an agreement could be founded.
case of failure to pay the note.
APPEAL from a judgment of the Court of First Instance of Manila.
"Manila, June 5,1912.
Lobingier, J.
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(Sgd.) "For Padern, Moreno & Co., by F. Moreno, member of the the purpose of showing an absolute lack or failure of
firm. For Jose Padern, by F. Moreno. Angel Gimenez." consideration.

The note was indorsed on the back as follows: It seems, according to the parol evidence provisionally admitted
on the trial, that the defendant v:as a broker doing business in
"Pay to the order of Don Fernando Maulini, value received. the city of Manila and that part of his business consisted in
Manila, June 5, 1912. (Sgd.) A. G. Serrano." looking up and ascertaining persons who had money to loan as
The first question f or resolution on this appeal is whether or not, well as those who desired to borrow money and, acting as a
under the Negotiable Instruments Law, an indorser of a mediary, negotiate a loan between the two. He had done much
negotiable promissory note may, in an action brought by his business with the plaintiff and the borrower, as well as with
indorsee, show, by parol evidence, that the indorsement was many other people in the city of Manila, prior to the matter which
wholly without consideration and that, in makingit, the indorser is the basis of this action, and was well known to the parties
acted as agent for the iridorsee, as a mere vehicle of transfer of interested. According to his custom in transactions of this kind,
the naked title from the maker to the indorsee, for which he and the arrangement made in this particular case, the broker
received no consideration whatev'er. obfained compensation for his services of the borrower, the
lender paying nothing therefor. Sometimes this was a certain per
The learned trial court, although it received parol evidence on cent of the sum loaned; at other times it was a part of the
the subject provisionally, held, on the final decision of the case, interest which the borrower was to pay, the latter paying 11 per
that such evidence was not admissible to alter, vary, modify or cent per month for the use of the money, the lender taking 1 per
contradict the terms of the contract of indorsement, and, cent and the broker i per cent. According to the method usually
therefore, refused to consider the evidence thus provisionally followed in these transactions, and the procedure in this
received, which tended to show that, by verbal agreement particular case, the broker delivered the money personally to the
between the indorser and the indorsee, the indorser, in making borrower, took the note in his own name and immediately
the indorsement, was acting as agent for the indorsee, as a mere transferred it by indorsement to the lender. In the case at bar
vehicle for the transference of naked title, and that his this was done at the special request of the indorsee and simply
indorsement \vas wholly without consideration. The court also as a favor to him, the latter stating to the broker that he did not
held that it was immaterial whether there was a consideration for wish hi? name to appear on the books of the borrowing company
the transfer or not, as the indorser, under the evidence offered, as a lender of money and that he desired that the broker take
was an accommodation indorser. the note in his own name, immediately transferring to him title
thereto by indorsement. This was done, the note being at once
We are of the opinion that the trial court erred in both findings.
transferred to the lender.
In the first place, the consideration of a negotiable promissory
According to the evidence referred to, there never was a moment
note, or of any of the contracts connected therewith, like that of
when Serrano was the real owner of the note. It was always the
any other written instrument, is, between the immediate parties
note of the indorsee, Maulini, he having furnished the money
to the contract, open to attack, under proper circumstances, for
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which was the consideration for the note directly to the maker accommodating sorae other party who is to use it and is
and being the only person who had the slightest interest therein, expected to pay it. The credit given to the accommodation party
Serrano, the broker, acting solely as an agent, a vehicle by is sufficient consideration to bind the accommodation maker.
which the naked title to the note passed from the borrower to Where, however, an indorsement is made as a favor to the
the lender. The only payment that the broker received was for indorsee, who requests it, not the better to secure payment, but
his services in negotiating the loan. He was paid absolutely to relieve himself from a distasteful situation, and where the only
nothing for becoming responsible as an indorser on the paper, consideration for such indorsement passes from the indorser to
nor did the indorsee lose, pay or forego anything, or alter his the indorsee, the situation does not present one creating an
position thereby. accomodation indorsement, nor one where there is a
consideration sufficient to sustain an action on the indorsement.
Nor was the defendant an accommodation indorser. The learned
trial court quoted that provision of the Negotiable Instruments The prohibition in section 285 of the Coile of Civil Procedure does
Law which defines an accommodation party as "one who has not apply to a case like the one before us. The purpose of that
signed the intrument as maker, drawer, acceptor, or indorser, prohibition is to prevent alteration, change, modification or
without receiving value therefor, and for the purpose of lending contradiction of the tcrms of a written instrument, admittedly
his name to some other person. Such a person is liabie on the existing, by the use of parol evidence, except in the cases
instrument to a holder for value, notwithstanding such holder at specifically named in the section. The case at bar is not one
the time of taking the instrument knew the same to be only an where the evidence offered varies, alters, modifies or contradicts
accommodation party." (Act No. 2031, sec. 29.) the terms of the contract of indorsement admittedly existing. The
evidence was not offered for that purpose. The purpose was to
We are of the opinion that the trial court misunderstood this show that no contract of indorsement ever existed; that the
definition. The accommodation to which reference is made in the minds of the parties never met on the terms of such a contract;
section quoted is not one to the person who takes the note—that that they never mutually agreed to enter into such a contract;
is, the payee or indorsee, but one to the maker or indorser of the and that there never existed a consideration upon which such an
note. It is true that in the case at bar it was an accommodation agreement could be founded. The evidence was not offered to
to the plaintiff, in a popular sense, to have the defendant indorse vary, alter, modify, or contradict the terms of an agreement
the note; but it was not the accommodation described in the law, which it is admitted existed between the parties, but to deny that
but, rather, a mere favor to him and one which in no way bound there ever existed any agreement whatever; to wipe out all
Serrano. In cases of accommodation indorsement the indorser apparent relations between the parties, and not to vary, alter or
makes the indorsement for the accommodation of the maker. contradict the terms of a relation admittedly existing; in other
Such an indorsement is generally for the purpose of better words, the purpose of the parol evidence was to demonstrate,
securing the payment of the note—that is, he lends his name to not that the indorser did not intend to make the particular
the maker, not to the holder. Putting it in another way: An indorsement which he did make; not that he did not intend to
accommodation note is one to which the accommodation party make the indorsement in the terms made; but, rather, to deny
has put his name, without consideration, for the purpose of the reality of any indorsement; that a relation of any kind
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whatever was created or existed hetween him and the indorsee some manner limited, distinguishing it from that of the regular or
by reason of the writing on the back of the instrument; that no general indorser, and among those kinds is that of the qualified
consideration ever passed to sustain an indorsement of any kind indorsement which, pursuant to section 38 of the same Act,
whatsoever. constitutes the indorser a mere assignor of the title to the
instrument, and may be made by adding to the indorser's
The contention has some of the appearances of a case in which signature the words "without recourse" or any words of similar
an indorser seeks to prove forgery. Where an indorser claims import.
that his hame was forged, it is clear that parol evidence is
admissible to prove that fact, and, if he proves it, it is a complete If the defendant, Antonio G. Serrano, intervened, as he alleged
defense, the factrbeing that the indorser never made any such and tried to prove that he did at the trial, only as a broker or
contract, that no such relation ever existed between him and the agent between the lender and plaintiff, Maulini, and the makers
indorsee, and that there was no consideration whatever to of the promissory note, Padern, Moreno & Co. and Angel
sustain such a contract. In the case before us we have a Gimenez, in order to afford an opportunity to the former to
condition somewhat similar. While the indorser does not claim invest the amount of the note in sucb. manner that it might
that his name was forged, he does claim that it was obtained bring him interest, the defendant could have qualified the
from him in a manner which, between the parties themselves, indorsement in question by adding to his signature the words
renders the contract as completely inoperative as if it had been "without recourse" or any others' such as would have made
forged. known in what capacity he intervened in that transaction. As the
defendant did not do so and as he signed the indorsement in
Parol evidence was admissible for the purposes named. favor of the plaintiff Maulini for value received from the latter,
There is no contradiction of the evidence offered by the defense his liabiiity, according to section 66 of the Act aforeeited, is that
and received provisionally by the court. Accepting it as true the of a regular or general indorser, who, this same section provides,
judgment must be reversed. engages that if the instrument be dishonored, and the necessary
proceedings on dishonor be duly taken, he will pay the amount
The judgment appealed from is reversed and the complaint thereof to the holder, or to any subsequent indorser who may be
dismissed on the merits; no special finding as to costs. compelled to pay it. And the evidence which the defendant
presented, tending to show what were the conditions to which he
Arellano, C. J., Johmon and Trent, J.J., concur.
obligated himself and in what capacity he intervened in making
TORRES, J., with whom concurs ARAULLO, J., dissenting: that indorsement and that this latter was absolutely without
consideration, should not have been admitted so that he might
elude the aforesaid obligation, or, if admitted, should not be
Act No. 2031, known as the Negotiable Instruments Law, which taken into account, because as a regular indorser he warranted,
governs the present case, establishes various kinds of pursuant to the said section 66, that the instrument was genuine
indorsements by means of which the liability of the indorser is in and in all respects what it purported to be, that he had a good
title to it, and that it was at the time of his indorsement valid
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and subsisting. He cannot, therefore, by means of any evidence, instrument itself and the intention is determined by the very
and much less of such as consists of his own testimony, and as same capacity, as occurs in this case, the admission of evidence
such interested party, alter, modify, contradict or annul, as he in reference thereto is entirely unnecessary, useless, and
virtually claimed and claims to be entitled to do, what in writing contrary to the purposes of the law, which is clear and precise in
and with a full and perfect knowledge of the meaning and import its provisions and admits of no subterfuges or evasions for
of the words contained in the indorsement, he set forth therein escaping obligations contracted upon the basis of credit, with
over his signature. evident and sure detriment to those who intervened or took part
in the negotiation of the instrument.
Section 63 of the Act above cited says that a person placing his
signature upon an instruraent otherwise than as maker, drawer, However, it is held in the majority opinion, for the purpose of
or acceptor is deemed to be an indorser, unless he clearly sustaining the premise that the proofs presented by the
indicates by appropriate words his intention to be bound in some defendant could have been adraitted without violating the
other capacity. This provision of the law clearly indicates that in provisions of section 285 of the Code of Civil Procedure, that the
every negotiable instrument it is absolutely necessary to specify evidence was not offered to vary, alter, modify, or contradict the
the capacity in which the person intervenes who is mentioned terms of an agreement which it is admitted existed between the
therein or takes part in its negotiation, because only by so doing parties, but to deny that there ever existed amj agreement
can it be determiixed what liabilities arise from that intervention whatever; to wipe out all apparent relations between the parties,
and from whom, how and when they must be exacted. And if, in and not to vary, alter or contradict the terms of a relation
the event of a failure to express the capacity in which the person admittedly existing; in other words, the purpose of the parol
who signed the negotiable instrument intended to be bound, he evidence was to demonstrate, not that the indcirser did not
should be deemed to be an indorser, when the very words of the intend to make the particular indorsement which he did, not that
instrument expressly and conclusively show that such he is, as he did not intend to make the indorsement in the terms made,
occurs in the present case, and when the indorsement contains but rather to deny the reality of any indorsement; to deny that a
no restriction, modification, condition or qualification whatever, relation of any kind whatsoever was created or existed between
there cannot be attributed to him, without violating the him and the indorsee by reason of the writing on the back of the
provisions of the said Act, any other intention than that of being instrument; to deny that any consideration ever passed to
bound in the capacity in which he appears in the instrument sustain an indorsement of any kind whatsoever. It is stated in
itself, nor can evidence be admitted or, if already admitted, the same decision that the contention has some of the
taken into consideration, for the purpose of proving such other appearances of a case in which an indorser seeks to prove
intention, for the simple reason that if the law has already fixed forgery.
and determined the capacity in which it must be considered that
First of all, we do not see that there exists any appearance or
the person who signed the negotiable instrument intervened and
similarity whatever between the case at bar and one where
the intention of his being bound in a definite capacity, for no
forgery is sought to be proved. The defendant did not, either
other purpose, undoubtedly, than that there shall be no evidence
civilly or criminally, impugn the indorsement as being false. He
given in the matter, when that capacity appears in the
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admitted its existence, as stated in the majority opinion itself, particular way appears in the instrument itself or has been fixed
and did not disown his signature written in the indorsement. His by statute, if it is not shown that he did so in some other
denial to the effect that the indorsement was wholly without capacity than that of maker, drawer or acceptor.
consideration, aside from the fact that it is in contradiction to the
But, aside from what the Code of Civil Procedure prescribes with
statements that he over his signature made in the instrument,
respect to this matter, as the present case is governed by the
does not allow the supposition that the instrument was forged.
Negotiable Instruments Law, we must abide by its provisions.
The meaning which the majority opinion apparently wishes to
Section 24 of this Act, No. 2031, says that every negotiable
convey, in calling attention to the difference between what, as it
instrument is deemed prima facie to have been issued for a
says, was the purpose of the evidence presented by the
valuable consideration; and every person whose signature
defendant and what was sought to be proved thereby, is that the
appears thereon, to have become a party thereto f or value. If
defendant does not endeavor to contradict or alter the terms of
the Act establishes this presumption for the case where there
the agreement, which is contained in the instrument and is
might be doubt with respect to the existenee of a valuable
admitted to exist between the parties; but to deny the existence
consideration, in order to avoid the taking of evidence in the
of such an agreement between them, that is, the existence of
matter, when the consideration appears from the instrument
any indorsement at all, and that any consideration ever passed
itself by the expression of the value, the introduction of evidence
to sustain the said indorsement, or, in other words, that the
is entirely unnecessary and improper.
defendant acknowledged tjie indorsement as regards the form in
which it appears to have been drawn up, but not with respect to According to section 25 of the same Act, value is any
its essence, that is, to the truth of the particular facts set forth in consideration sufficient to support a simple contract, and so
the indorsement. It cannot be denied that the practical result of broad is the scope the law gives to the meaning of "value" in this
such evidence is other than to contradict, modify, alter or even kind of instruments that it considers as such a prior or
to annul the terms of the agreement contained in the preexistent debt, whether the instrument be payable on demand
indorsement: so that, in reality, the distinction does not exist or at some future date.
that is mentioned as a ground of the decision of the majority of
the court in support of the opinion that the evidence in question Section 26 provides that where value has at any time been given
rnight have been admitted, without violating the provisions of f or the instrument, the holder is deemed a holder for value in
the aforementioned section 285 of the Code of Civil Procedure. respect to all parties who became such prior to that time. It is
This section is based upon the same principle which is taken into unquestionable that the defendant gave the 1*3,000 for the
account in 'the Negotiable Instruments Law to write into it such instrument, and, for the purpose of the plaintiff's being
positive and definite provisions which purport, considered a holder for value, both in respect to the maker and
to the defendant indorser, it is immaterial whether he did so
without possibility of discussion or doubt, the uselessness of directly to the person who appears in the promissory note as the
taking evidence when the capacity of the person who intervened maker or whether he delivered the sum to the defendant in order
in a negotiable instrument or his intention of being bound in a that this latter might in turn deliver it to the maker.
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The defendant being the holder of the instrument, he is also Pursuant to section 56 of the said Act, to constitute notice of a
unquestionably the holder in due course. In the first place, in deficiency in the instrument or defect in the title of the person
order to avoid doubts with respect to this matter, which might negotiating. the same, the person to whom it is transferred must
require the introduction of evidence, the Act before mentioned have had actual knowledge of the deficiency or defect, or
has provided, in section 59, that every holder is deemed prima knowledge of such facts that his action in taking the instrument
facie to be a holder in due course, and such is the weight it gives amounted to bad faith.
to this presumption and to the consequences derived therefrom,
In the present case it cannot be said, for it is not proven, that
that it imposes upon the holder the burden to prove that he or
the plaintiff, upon accepting the instrument from the defendant,
some person under whom he claims acquired the title in due
had actual knowledge of any deficiency or defect in the same, for
course, only when it is shown that the title of any person who
the simple reason that it contains no deficiency or defect. Its
has negotiated the instrument was defective. This rule, however,
terms are very clear and positive. There is nothing ambiguous,
pursuant to the said section, does not apply in favor of a party
concealed, or which might give rise to any doubt whatever with
who became bound on the instrument prior to the acquisition of
respect to its terms or to the agreement made by the parties.
such defective title, in which case the defendant Serrano is not
Furthermore, as stated in the majority opinion, the defendant did
included, because, in the first place, he was not bound on the
not intend to make the particular indorsement which he did
instrument prior to the acquisition of the title by the plaintiff, but
raake in the terms, form and manner in which it was made, nor
it was the maker of the promissory note who was bound on the
did he intend to change or alter the terms of the agreement
instrument executed in favor of the defendant or indorser prior
which is admitted to have existed between the parties. All of
to the acquisition of the title by the plaintiff; and, in the second
which indicates that, neither as regards the plaintiff nor as
place, it does not appear, nor was it proved, as will be seen
regards the defendant, was there any deficiency or defect in the
hereinafter, that the title in question was defective.
title or in the instrument, and that the plaintiff, upon taking or
According to section 52 of the same Act, the plaintiff is the receiving the instrument frora the defendant, had no knowledge
holder in due course of the instrument in question, that is, of the of any fact from which bad faith on his part might be implied.
promissory note containing the obligation eompliance with which Besides, no evidence was produced of the existence of any such
is demanded of him by the defendant, because he took the bad faith, nor of the knowledge of any deficiency or defect.
instrument under the conditions: (a) That it was complete and
Moreover, section 55 of Act No. 2031 provides that the title of a
regular upon its face; (6) that he became the holder of it before
person who negotiates an instrument is defective within the
it was overdue, and without notice that it had been previousiy
meaning of this Act when he obtained the instrument, or any
dishonored; (c) that he took it in good faith and for value; and
signature thereto, by fraud, duress, or force and fear, or other
(d) that at the time it was negotiated to him he had no notice of
unlawful means, or for an illegal consideration, or when he
any deficiency in the instrument or defect in the title of the
negotiates it in breach of faith, or under such circumstances as
person negotiating it.
amount to a fraud. As no evidence was taken on these points,
the only ones that may be proven as regards negotiable
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instruments, the defendant must be deemed to be the holder of Basing our conclusions on the f oregoing grounds, and regretting
the instrument in due course, pursuant to the provisions of the to dissent from the opinion of the majcrity of our colleagues, we
aforecited section 59, and he cannot be required to prove that he believe that the judgment appealed from should be affirmed,
or his predecessor in interest acquired the title as such holder in with the costs against the appellant.
due course.
Judgment reversed and complaint dismissed. Maulini vs.
Now then, according to section 28 of the same Aet, as against Serrano., 28 Phil. 640, No. 8844 December 16, 1914
the holder of the instrument in due course absence or failure of
consideration is not a matter of defense; and, pursuant to
section 57, a holder in due course holds the instrument free from
any defect of title of prior parties, and free from defenses
available to prior parties among themselves, and may enf orce
payment of the instrument f or the full amount thereof against
all parties liable thereon. And the next section, No. 58 prescribes
that in the hands of any holder other than a holder in due
course, a negotiable instrument is subject to the same defenses
as if it were nonnegotiable.

So it could not be clearer than that, pursuant to the provisions of

the Negotiable Instruments Law, which governs the case at bar,
as the plaintiff is the holder in due course of the instrument in
question, no proof whatever from the defendant could be
admitted, nor if admitted should be taken into account, bearing
on the lack of consideration in the indorsement, as alleged by
him, and for the purpose of denying the existence of any
indorsement and that any relation whatever was created or
existed between him and the indorsee; likewise, that no
defenses of any kind could have been admitted from the
defendant in respect to the said instrument, and, finally, that the
defendant is obligated to pay the sum mentioned in the said
indorsement, it being immaterial whether or not he be deemed
to be an accommodation party in the instrument, in order that
compliance with the said obligation may be required of him in his
capacity of indorser.