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Negotiable Instruments Law | Finals Reviewer

Sec. 29. Liability of accommodation party. - An Parol evidence to prove accommodation


accommodation party is one who has signed the instrument
as maker, drawer, acceptor, or indorser, without receiving  The accommodation party is permitted to show by parol
value therefor, and for the purpose of lending his name to evidence which party he accommodated. If this were
some other person. Such a person is liable on the instrument not so, an accommodated party may enforce payment
to a holder for value, notwithstanding such holder, at the time against the accommodation party
of taking the instrument, knew him to be only an
accommodation party.
Liability of accommodation party to a holder
Definition of Terms
1. Absence of consideration not a defense – “Such a
1. Accommodation note or bill – is one which the person is liable on the instrument to a holder for value,
accommodation party has put up its name, without notwithstanding such holder, at the time of taking the
consideration, for the purpose of accommodating some instrument, knew him to be only an accommodation
party who is to use it, and is expected to pay it. party. “ This means that want or absence of
consideration is not a valid defense against the holder
2. Accommodation party – is one who has signed the for value by the accommodation party. Such defense
instrument as maker, drawer, acceptor, indorser, may only be available against the accommodated party
without receiving value for the signature and for the
purpose of lending his name to some other person. 2. Rule NOT applicable to corporations – because the
issue or indorsement of negotiable paper by a
corporation without consideration and for
accommodation of another is Ultra Vires. Who is liable
3. Accommodated party – is one whose favor a person, then? Those who signed (Piercing the veil of corporate
without receiving value therefore, signs an instrument fiction)
for the purpose of lending his credit and enabling said
party to raise money upon it.
3. Accommodation party, in effect, a surety – Rights of accommodation party
Accommodation party is in effect a surety, the
accommodated party being the principal. 1. Right to revoke accommodation
2. Right to reimbursement from accommodated party
3. Right to contribution from other solidary
accommodation maker
4. Right of accommodation party to notice of default
or delinquency of the accommodated party – an Kinds of Accommodation party
accommodation party has a right to be properly
appraised of the default or delinquency of the *Primarily liable
accommodated part because of solidary liability
*Secondarily liable
1. Accommodation Maker (PL)
5. Where instrument vitiated by an illegality of cause 2. Accommodation Drawer (SL)
– No recovery by a payee against an accommodation 3. Accommodation Acceptor (PL)
party 4. Accommodation Indorser (SL)

6. Liability of solidary accommodation makers –


Sadaya vs Sevilla, three accommodation makers
executed jointly and severally in favor of a bank, it has
been held that anyone of the solidary accommodation
makers may be held liable.
Accommodation Party Regular Party
Signs an instrument without For value
receiving value therefor
Signs the instrument for the Does not sign for that
purpose of lending his name purpose

May always show parol Cannot disclaim or limit his


evidence personal liablity
Cannot avail the defense of May avail of such defense
absence or failure of against a HNIDC
consideration against a
HNIDC
After paying the holder, may May not sure any subsequent
sure for reimbursement the party for reimbursement
accommodated party,
although a subsequent party

Cases
Sadaya vs Sevilla
Three accommodation makers executed jointly and severally
in favor of a bank, it has been held that anyone of the solidary
accommodation makers may be held liable.