CASE #07 (by: G.

Remo)
EUSEBIO GONZALES vs. PHILIPPINE COMMERCIAL AND INTERNATIONAL BANK, EDNA
OCAMPO, and ROBERTO NOCEDA
GR No. 180257, FEBRUARY 23, 2011
VELASCO JR., J
DOCTRINE: An accommodation party is 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.
FACTS:
On October 30, 1995, Gonzales and his wife obtained a loan for PhP 500,000. Subsequently, on
December 26, 1995 and January 3, 1999, the spouses Panlilio and Gonzales obtained two
additional loans from PCIB in the amounts of PhP 1,000,000 and PhP 300,000, respectively.
These three loans amounting to PhP 1,800,000 were covered by three promissory
notes. To secure the loans, a real estate mortgage (REM) over a parcel of was executed by
Gonzales and the spouses Panlilio. Notably, the promissory notes specified, among others,
the solidary liability of Gonzales and the spouses Panlilio for the payment of the
loans. However, it was the spouses Panlilio who received the loan proceeds of PhP
1,800,000.

The monthly interest dues of the loans were paid by the spouses Panlilio through the automatic
debiting of their account with PCIB. But the spouses Panlilio, from the month of July 1998,
defaulted in the payment of the periodic interest dues from their PCIB account which apparently
was not maintained with enough deposits. PCIB allegedly called the attention of Gonzales
regarding the July 1998 defaults and the subsequent accumulating periodic interest dues which
were left still left unpaid.

Gonzales issued a check dated September 30, 1998 in favor of Rene Unson for PhP 250,000
drawn against the credit line (COHLA). However, on October 13, 1998, upon presentment for
payment by Unson of said check, it was dishonored by PCIB due to the termination by PCIB of the
credit line under COHLA on October 7, 1998 for the unpaid periodic interest dues from the loans
of Gonzales and the spouses Panlilio. PCIB likewise froze the FCD account of Gonzales.

On January 28, 1999, Gonzales, through counsel, wrote PCIB insisting that the check he issued
had been fully funded, and demanded the return of the proceeds of his FCD as well as damages
for the unjust dishonor of the check. PCIBs refusal to heed his demands compelled Gonzales to
file the instant case for damages with the RTC, on account of the alleged unjust dishonor of the
check issued in favor of Unson.

ISSUES:
1.) Whether Eusebio Gonzales, as an accommodation party, is solidarily liable with Spouses for the
three promissory notes issued to PCIB?
2.) Whether it was proper for PCIB to dishonor the check issued by Gonzales against the credit line
under the COHLA without proper notice?
HELD:
1.) YES. Clearly, Gonzales is liable for the loans covered by the above promissory notes. First, Gonzales
admitted that he is an accommodation party which PCIB did not dispute. In his testimony, Gonzales
admitted that he merely accommodated the spouses Panlilio at the suggestion of Ocampo, who was then
handling his accounts, in order to facilitate the fast release of the loan.
Moreover, the first note for PhP 500,000 was signed by Gonzales and his wife as borrowers, while the
two subsequent notes showed the spouses Panlilio sign as borrowers with Gonzales. It is, thus, evident
that Gonzales signed, as borrower, the promissory notes covering the PhP 1,800,000 loan despite not
receiving any of the proceeds.
The fact that the loans were undertaken by Gonzales when he signed as borrower or co-borrower for the
benefit of the spouses Panlilio as shown by the fact that the proceeds went to the spouses Panlilio who
were servicing or paying the monthly dues is beside the point. For signing as borrower and co-borrower
on the promissory notes with the proceeds of the loans going to the spouses Panlilio, Gonzales has
extended an accommodation to said spouses.
Third, as an accommodation party, Gonzales is solidarily liable with the spouses Panlilio for the loans.
In Ang v. Associated Bank, quoting the definition of an accommodation party under Section 29 of the
Negotiable Instruments Law, the Court cited that an accommodation party is 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.
2.) NO. PCIBs negligence in not giving Gonzalesan accommodation partyproper notice relative to the
delinquencies in the PhP 1,800,000 loan covered by the three promissory notes, the unjust termination,
revocation, or suspension of the credit line under the COHLA from PCIBs gross negligence in not
honoring its obligation to give prior notice to Gonzales about such termination and in not informing
Gonzales of the fact of such termination, treating Gonzales account as closed and dishonoring his PhP
250,000 check, was certainly a reckless act by PCIB. This resulted in the actual injury of PhP 250,000 to
Gonzales whose FCD account was frozen and had to look elsewhere for money to pay Unson.
First. There was no proper notice to Gonzales of the default and delinquency of the PhP 1,800,000 loan.
It must be borne in mind that while solidarily liable with the spouses Panlilio on the PhP 1,800,000 loan
covered by the three promissory notes, Gonzales is only an accommodation party and as such only lent
his name and credit to the spouses Panlilio. While not exonerating his solidary liability, Gonzales has a
right to be properly apprised of the default or delinquency of the loan precisely because he is a cosignatory of the promissory notes and of his solidary liability.

Second. PCIB was grossly negligent in not giving prior notice to Gonzales about its course of action to
suspend, terminate, or revoke the credit line, thereby violating the clear stipulation in the COHLA.
Third. There is no dispute on the right of PCIB to suspend, terminate, or revoke the COHLA under the
cross default provisions of both the promissory notes and the COHLA. However, these cross default
provisions do not confer absolute unilateral right to PCIB, as they are qualified by the other stipulations
in the contracts or specific circumstances, like in the instant case of an accommodation party.