G.R. Nos. 29048-29049, October 25, 1928
PHILIPPINE TRUST COMPANY, plaintiff-appellee, vs. F.M. YAP TICO & CO., LTD., ET AL., defendants. F. M. YAP TICO & CO., LTD., appellant.

FACTS

The Philippine Trust Company filed two separate collection cases (consolidated on appeal) to recover on three promissory notes. The first note for P50,000 was executed by The Visayan General Supply Co., Inc. and F.M. Yap Tico & Co., Ltd., payable to Enrique Echaus. The second and third notes, each for P25,000, were executed solely by F.M. Yap Tico & Co., Ltd., payable to The Visayan General Supply Co., Inc. All notes were endorsed and delivered to the plaintiff bank for value. The defendants Visayan General Supply Co., Inc. and Enrique Echaus were declared in default. The defendant-appellant F.M. Yap Tico & Co., Ltd. contested the suits, claiming its President and General Manager, Yap Seng, signed the notes merely as an accommodation party without consideration and that the corporation lacked the power to issue such accommodation paper.

ISSUE

1. Whether the defense that the promissory notes were signed as an accommodation party without consideration is valid and proven.
2. Whether the corporation is estopped from denying the authority of its officer or its own power to issue the notes.

RULING

The Supreme Court AFFIRMED the trial court’s judgment in favor of Philippine Trust Company.

1. The defense of being an accommodation party was not proven. The deposition of Yap Seng, which was offered to prove this claim, was properly rejected by the trial court. The circumstances of the case, including the substantial amounts involved, contradicted the appellant’s contention. Furthermore, the plaintiff bank was a holder in due course, having acquired the notes in the ordinary course of business for value (by discounting them) before maturity and without notice of any defect.

2. The corporation is estopped from denying the validity of the obligations. The President and General Manager, Yap Seng, executed the corporate contracts in the name of the corporation. By doing so, he led third parties like the plaintiff to believe he and the corporation had the authority to do so. The corporation cannot now repudiate these transactions to the prejudice of an innocent holder for value. The Court cited the doctrine of estoppel as applied in *Coleman vs. Hotel de France Co.*.

Since the appellant failed to prove its defenses, the promissory notes remain valid and enforceable obligations. The appellant was ordered to pay the principal sums with the stipulated interest.