G.R. No. 26486 , April 1, 1927
MARIANO ACUÑA, plaintiff-appellee, vs. MARIANO G. VELOSO and NARCISO XAVIER, defendants; MARIANO G. VELOSO, appellant. FRANCISCO J. GONZALES, intervenor-appellee.

FACTS

Mariano Acuña sued as transferee of a joint and several promissory note for P25,000 executed by Narciso Xavier and Mariano G. Veloso in favor of Francisco J. Gonzales. Xavier needed funds to purchase a property on Legarda Street. Gonzales agreed to advance the money on two conditions: (1) Xavier and Veloso would execute a joint and several note, and (2) Xavier would buy Gonzales’ half-interest in a mortgage credit on Hacienda Leet. Veloso, Xavier’s principal and friend, agreed to sign the note to assist Xavier. An undated note with the payee’s name left blank was signed by both. Later, Gonzales filled in his name as payee, dated it, and advanced the money to Xavier. Xavier used the funds to buy the Legarda property and gave a second mortgage on it to Gonzales to secure the note. Over two years after the note matured, Gonzales transferred it and his mortgage interest to Acuña for value. Veloso defended by claiming the note lacked consideration as to him since he received no money and that Acuña was not a holder in due course.

ISSUE

1. Is Veloso, as an accommodation party, liable on the joint and several promissory note to the payee (Gonzales) or his transferee (Acuña) who gave value for it at the time of its creation?
2. Is Acuña, as a transferee after maturity, entitled to enforce the note?

RULING

YES, on both issues.
1. Veloso is liable. The note was supported by valuable considerationthe money advanced by Gonzales to Xavier at the time of its creation. Although Veloso signed as an accommodation party for Xavier and received no part of the loan, the advance to Xavier constituted sufficient consideration for both makers. As between themselves, Veloso is a surety, but as to the creditor, both are joint and several makers. The defense of lack of consideration is unavailing against a payee who gave value.
2. Acuña can enforce the note. Although Acuña acquired the note after maturity and thus is not a holder in due course, he is an assignee of all the rights of Gonzales, the original payee. Since Gonzales gave full value for the note at its inception, Acuña steps into Gonzales’ shoes and may enforce it. The Court modified the trial court’s judgment regarding Veloso’s right of subrogation, clarifying that if the proceeds from the foreclosure of the mortgaged Legarda property are insufficient to cover the entire secured debt, Veloso is entitled to subrogation proportional to the amount of the note and interest relative to the total secured indebtedness.