Title
Ang vs. Associated Bank
Case
G.R. No. 146511
Decision Date
Sep 5, 2007
Bank sued Tomas Ang and Antonio Ang Eng Liong for unpaid loans. Tomas, an accommodation party, claimed no liability. Court ruled Tomas liable under NIL, affirmed bank's standing, and upheld jurisdiction.

Case Summary (G.R. No. 237291)

Key Dates

  • Promissory notes executed: October 3 and October 9, 1978.
  • Due dates: December 8, 1978 (PN-No. DVO-78-390) and January 31, 1979 (PN-No. DVO-78-382).
  • Complaint filed by Associated Bank: August 28, 1990.
  • Trial court decision (initially against Antonio Ang Eng Liong): February 21, 1991 (became final and executory for that defendant at the time).
  • Writ of execution issued: April 5, 1991.
  • Trial court later dismissed complaint as to Associated Bank: January 5, 1996.
  • Court of Appeals decision reversing trial court: October 9, 2000; motion for reconsideration denied December 26, 2000.
  • Supreme Court decision affirming Court of Appeals: September 5, 2007.

Applicable Law and Legal Framework

Primary substantive sources applied by the courts (under the 1987 Philippine Constitution, as required by the decision date): the Negotiable Instruments Law (NIL) — notably Sections 29, 119(d), 122, and 191 — and relevant provisions of the Civil Code (Articles 1207, 1249, 2047, 2080 and related provisions on joint and solidary obligations). Governing administrative instruments and transfers were Proclamation No. 50, Administrative Order No. 14, and subsequent Deeds of Transfer and Trust Agreement creating and empowering the Asset Privatization Trust (APT), as reflected in the record.

Factual Background

Associated Bank alleged that the two promissory notes were obtained by the defendants for loans of P50,000 and P30,000 and that amendments/disclosure statements provided for 14% interest per annum, 2% service charge per annum, 1% monthly penalty from due date, and 20% attorney’s fees. The bank calculated total indebtedness as of July 31, 1990 at P539,638.96. Antonio Ang Eng Liong admitted obtaining an P80,000 loan but disputed the computation; Tomas Ang denied receiving proceeds (asserting he was an accommodation party), raised defenses including incomplete-but-delivered instruments, forgery/fraud, lack of holder status of the bank, usurious and onerous additional stipulations, and asserted counterclaims/cross-claims for damages and fees.

Procedural History — Trial and Interlocutory Rulings

  • Antonio Ang Eng Liong defaulted for failure to submit pre-trial brief; ex-parte presentation and judgment were initially rendered against him on February 21, 1991. That decision became final and executable as to him at the time.
  • Tomas Ang continued in the litigation, asserting defenses and seeking production of bank documents; the trial court denied some discovery and evidentiary requests, admitted certain exhibits tendered by Tomas for failure of the bank to comment, and ultimately (on January 5, 1996) dismissed the complaint for lack of cause of action on the ground that the Asset Privatization Trust, not the bank, held the notes at the time the suit was filed.

Court of Appeals Decision

The Court of Appeals reversed the trial court on the core issue of the bank’s status as holder. It held: (1) Associated Bank qualified as a “holder” under Sec. 191 NIL because the bank retained physical possession of the notes when it filed suit and the APT had not been shown to be the payee, indorsee in possession, or bearer; (2) once the bank was a holder for value, Tomas Ang — as a co-maker who signed “jointly and severally” — was liable notwithstanding his claim to be an accommodation party, applying Sec. 29 NIL; (3) claims for service, penalty and attorney’s fees were dismissed for lack of contractual basis in the promissory notes themselves. The appellate court thus ordered Tomas Ang to pay P50,000 and P30,000 respectively, with 14% interest from their dates of default; all other claims dismissed.

Supreme Court’s Central Analysis — Real Party in Interest and Supervening Event

The Supreme Court addressed whether Associated Bank was the real party in interest at the time of filing. It detailed the creation and function of the Asset Privatization Trust (APT) pursuant to Proclamation No. 50 and related transfers by deed and trust agreement. The Court concluded: (1) at the exact time the complaint was filed (August 28, 1990), APT arguably had authority to enforce certain non-performing assets transferred to it; (2) notwithstanding this, the case had become moot as to any defect in plaintiff’s real-party-in-interest status because of a supervening event: the “buy-back” reacquisition of the bank by its former owner (Leonardo Ty) in October 1993 while the case was pending, which restored the bank’s actual interest in and control over the disputed promissory notes; (3) by reclaiming ownership from the APT, Associated Bank thereby qualified as a “holder” under Sec. 191 NIL at the time of further proceedings and on appeal.

Accommodation Party, Solidary Liability, and Applicability of Article 2080

The Court reviewed governing principles on accommodation parties and solidary obligations. It reiterated that an accommodation party (Sec. 29 NIL) is liable to a holder for value even if the holder knew of the accommodation status. Because Tomas had signed the promissory notes “jointly and severally,” he functioned as a solidary co-maker. The Court distinguished a guarantor/surety from a solidary co-maker and held that Article 2080 of the Civil Code (which protects guarantors where the creditor’s act prevents subrogation) does not apply to a person who has bound himself as a solidary co-maker. Instead, Articles on joint and solidary obligations (Articles 1207 and following) govern. Thus, the defenses premised on Article 2080 and on the bank’s alleged failure to serve appeal documents on the co-debtor did not discharge petitioner’s liability.

Procedural and Evidentiary Contentions; Default of Principal Debtor

The Court addressed procedural claims: Tomas’s contention that the bank’s failure to serve notice of appeal and brief on Antonio Ang Eng Liong released him from liability was rejected. The Court reasoned that (1) the co-defendant was named in the caption and appellee’s brief; (2) the co-defendant had been declared in default twice and had not tendered defenses; (3) the co-defendant admitted obtaining the loan in his Answer; and (4) the notes were not shown to have been discharged, impaired, or renounced (Sections 119(d), 122 NIL and Art. 1249 Civil Code therefore did not apply). The Court further held that petitioner’s cross-claim for subrogation/remedies against his co-debtor was not foreclosed by the bank’s procedural steps.

Standard on Raising Errors Not Assigned on Appeal

The Supreme Court affirmed the Court of Appeals’ discretion to entertain issues not strictly assigned as errors on appeal where those issues affect jurisdiction, involve plain errors, are necessary for just resolution, are closely related to assigned errors, or are otherwise within recognized exceptions. The Court found the CA’s raising of the holder/real-party-in-interest issue to be appropriate given its determinative nature.

Other Defenses Addressed and Rejected

The Court systematically rejected petitioner’s other defenses on the merits where unsupported by clear and convincing evidence: claims of fraud in procuring signatures, of bank-imposed new onerous stipulations, of usury (rejected on the ground that present law allows agreed int

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