G.R. No. 81322 February 5, 1990
GREGORIO D. CANEDA, JR., petitioner, vs. HON. COURT OF APPEALS, HON. REGIONAL TRIAL COURT OF DAVAO, BRANCH IX, INVESTORS FINANCE CORPORATION, doing business under the name and style, “FNCB FINANCE”, AND BUENAVENTURA GUESON, respondents.

FACTS

Buenaventura Gueson executed a promissory note and chattel mortgage in favor of Gregorio Caneda, Jr. to secure a loan. Caneda subsequently assigned these instruments to Investors Finance Corporation (FNCB). Upon Gueson’s default, FNCB filed a complaint for sum of money and/or replevin. In his answer, Gueson claimed he was merely an accommodation party for Caneda, the real debtor, and filed a third-party complaint against Caneda. The trial court, after Caneda waived his right to present evidence due to failure to attend hearings, ruled that Gueson was indeed an accommodation party and held Caneda solely liable to FNCB, dismissing the complaint against Gueson. FNCB did not appeal this dismissal. The Court of Appeals affirmed the trial court’s decision holding Caneda liable.

ISSUE

Whether Gregorio Caneda, Jr., as the accommodated party, can be held primarily liable to FNCB for the debt despite the trial court’s dismissal of the complaint against the accommodation party, Buenaventura Gueson, which dismissal was not appealed by FNCB.

RULING

Yes. The Supreme Court affirmed the Court of Appeals’ decision holding Caneda liable. The legal logic is grounded on the principles governing accommodation parties under the Negotiable Instruments Law. An accommodation party, like Gueson, lends his name to another and is liable on the instrument to a holder for value, such as FNCB, even if the holder knew of the accommodation nature at the time of taking the instrument. The relation between the accommodation party and the accommodated party is that of surety and principal. Consequently, the creditor, FNCB, may proceed against either the principal debtor (Caneda) or the surety (Gueson), or both. The fact that FNCB did not appeal the dismissal of its claim against Gueson merely signifies that it opted to seek recovery solely from Caneda, thereby waiving its right against Gueson. This waiver does not extinguish the primary obligation of the accommodated party. Caneda, as the principal debtor who received the value of the loan, remains directly and primarily liable to FNCB. The Court found no merit in Caneda’s defenses, as the accommodation arrangement and his receipt of the loan proceeds were sufficiently established. The decision against him stands.