Acuña v. Veloso
REITERATIONFacts
The Antecedents: Mariano Acuña, as transferee of a P25,000 joint and several promissory note executed by Narciso Xavier and Mariano G. Veloso, sued to recover the amount with 10% interest. Xavier claimed he had mortgaged property to secure the note and later sold it, with the buyer assuming the debt. Veloso pleaded non est factum and argued the plaintiff was not a holder for value in good faith. Francisco J. Gonzalez, the original payee, intervened as plaintiff. Procedural History: The Court of First Instance of Manila rendered judgment jointly and severally against Xavier and Veloso for the P25,000 plus interest in favor of Acuña. It also granted Veloso judgment over against Xavier for any amount he paid and ordered Veloso's subrogation to Acuña's rights in a mortgage given by Xavier. The Appeal: Mariano G. Veloso appealed the decision, primarily contesting his liability on the promissory note and the terms of his subrogation rights.
Issue(s)
Whether Mariano G. Veloso, as an accommodation maker, is liable on the promissory note when the transferee acquired it after maturity. Whether the trial court erred in its order regarding Veloso's right of subrogation to the mortgage on the Legarda property.
Ruling
The Supreme Court affirmed the judgment in favor of the plaintiff but modified the order concerning Veloso's subrogation rights. It held Veloso liable on the note but clarified that his right of subrogation extends to the entire proceeds of the mortgaged property in proportion to the debts secured by the mortgage.
Ratio Decidendi
On Issue 1: The Supreme Court held that Mariano G. Veloso, as an accommodation maker, is liable on the promissory note. Although the plaintiff Acuña acquired the note more than two years after it fell due, making him merely an assignee and not a holder in due course, he stepped into the shoes of the original payee, Francisco J. Gonzalez. Gonzalez had paid full value for the note at the time of its creation, advancing P25,000 to Xavier for the purchase of the Legarda property. The Court rejected Veloso's plea of non est factum, finding his signature genuine and his participation intelligent, as he agreed to lend his credit to Xavier. The fact that Veloso did not personally receive the money did not negate the consideration for the note, as value was given for it by the payee. The Court distinguished this case from those where an accommodation maker is not liable because the note was negotiated after maturity by the accommodated payee, emphasizing that here, both makers executed a joint and several note to a payee who advanced the face value at creation. On Issue 2: The Supreme Court found merit in Veloso's fifth assignment of error regarding his right of subrogation. While the trial court recognized Veloso's right to be subrogated to the rights of Acuña (as successor to Gonzalez) in the second mortgage on the Legarda property, the order was unclear and potentially postponed Veloso's right with respect to P25,000 to another debt of P22,052 owed by Xavier to Gonzalez. The Court clarified that Veloso's right of subrogation extends to the whole proceeds of the mortgaged property in the proportion that the amount of the note (P25,000 plus interest) bears to the entire secured indebtedness, ensuring that neither debt is given preference over the other in the event of a shortfall at the foreclosure sale.
Main Doctrine
The Supreme Court affirmed that a transferee of a negotiable promissory note who acquires title after maturity, even if for value, is merely an assignee and takes the instrument subject to all equities and defenses that could have been set up against the assignor. Furthermore, an accommodation maker, who is jointly and severally liable with the principal debtor to the creditor, is entitled to reimbursement from the principal debtor and, upon payment, to be subrogated to the creditor's rights in any security given for the debt.