Stelco vs CA

Stelco Marketing vs. CA

GR 96160, 17 June 1992, 210 scra 51

--accommodation party

FACTS:

Stelco Marketing Corporation sold structural steel bars to RYL Construction Inc.  RYL gave Stelco’s “sister corporation,” Armstrong Industries, a MetroBank check from Steelweld Corporation.  The check was issued by Steelweld’s President  to Romeo Lim, President of RYL, by way of accommodation, as a guaranty and not in payment of an obligation.  When Armstrong deposited the check at its bank, it was dishonored because it was drawn against insufficient funds. When so deposited, the check bore two indorsements, i.e. RYL and Armstrong.  Subsequently, Stelco filed a civil case against RYL and Steelweld to recover the value of the steel products.

ISSUE:

Whether Steelweld as an accommodating party can be held liable by Stelco for the dishonored check.

RULING:

Steelweld may be held liable but not by Stelco.  Under Section 29 of the NIL, Steelweld Corp. can be held liable for having issued the subject check for the accommodation of Romeo Lim.  An accommodation party is one who has singed the instrument as maker, drawer, acceptor, or indorser, without receiving valued therefor, and for the purpose of lending his name to some other person. Such a person is liable on the instrument to a holder for value, notwithstanding such holder, at the time of taking the instrument, knew him to be only an accommodation party.   Stelco however, cannot be deemed a holder of the check for value as it does not meet two essential requisites prescribed by statute, i.e. that it did not become “the holder of it before it was overdue, and without notice that it had been previously dishonored,” and that it did not take the check “in good faith and for value.”