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HENRY DELA RAMA CO v. ADMIRAL UNITED SAVINGS BANK

FACTS:

Admiral United Savings Bank (ADMIRAL) granted a loan of P500,000.00 to Henry Dela Rama Co (Co) and Leocadio O. Isip (Isip) as co-maker. The loan was documented by a promissory note. Co and Isip failed to settle the loan on the due date, prompting ADMIRAL to file a collection case against them. Co raised in his answer that the promissory note was void from the beginning and that any obligations had already been paid, waived, or extinguished. While the case was ongoing, Isip passed away and was removed from the complaint. In response, Co filed a third-party complaint against Metropolitan Rentals & Sales, Inc. (METRO RENT), claiming that it influenced him to acquire the loan and promised prompt payment, which it failed to deliver. The Regional Trial Court (RTC) dismissed the complaint and the third-party complaint, ruling that the obligation had already been settled or extinguished. ADMIRAL appealed the decision of the RTC, and the Court of Appeals (CA) reversed it, holding Co liable for the loan. Co sought reconsideration before the CA, but it was denied. Hence, Co filed this appeal.

ISSUES:

  1. Whether Co is liable for the payment of his loan obligation to ADMIRAL.

  2. Whether METRO RENT is liable for the payment of the loan obligation.

RULING:

  1. Yes, Co is liable for the payment of his loan obligation to ADMIRAL. The Court of Appeals found that Co's liability under the promissory note was apparent in his express, absolute, and unconditional promise to pay the loan upon maturity. Co cannot set up the defense that he did not receive the value of the note or any consideration therefor, as he acknowledged receipt of the loan amounting to P500,000.00 and undertook to pay the same, plus interest, to ADMIRAL. Co's assertion that he merely acted as an accommodation party for METRO RENT does not release him from liability. An accommodation party is liable on the instrument to a holder for value even if he receives no part of the consideration.

  2. No, METRO RENT is not liable for the payment of the loan obligation. The Court of Appeals dismissed Co's third party complaint against METRO RENT for insufficiency of evidence. There was no showing that METRO RENT received the loan proceeds from Co or derived any benefit from the loan. METRO RENT cannot be held liable for the payment of the loan.

PRINCIPLES: