Clark vs Sellner GR No. 16477, 22 Nov 1921

Fact:
Plaintiff, obtained a promissory note signed by W. H. Clark and the defendant. When the notes fell due, no payment was remitted to the Plaintiff. The plaintiff filed an action against the defendant for the collection of the said note. The defendant argued that he is only an accommodating party and not liable to pay the amount due. He also argued that he did not received the said value, hence this case.

Issue:
Whether the Defendant was an accommodating party and is not liable to pay the Negotiable Instrument.

Held:
No, the defendant is not an accommodating party and is liable to pay the said instrument. it should be taken into account that by putting his signature to the note, he lent his name, not to the creditor, but to those who signed with him placing himself with respect to the creditor in the same position and with the same liability as the said signers. It should be noted that the phrase “without receiving value therefor,” as used in section 29 of the aforesaid Act, means “without receiving value by virtue of the instrument” and not, as it apparently is supposed to mean, “without receiving payment for lending his name.” If, as in the instant case, a sum of money was received by virtue of the note, it is immaterial, so far as the creditor is concerned, whether one of the singers has, or has not, received anything in payment of the use of his name. In reality the legal situation of the defendant in this case may properly be regarded as that of a joint surety rather than that of an accommodation party. The defendant, as a joint surety, may, upon the maturity of the note, pay the debt, demand the collateral security and dispose of it to his benefit; but there is no proof whatever that this was done. As to the plaintiff, he is the “holder for value,” under the phrase of said section 29, for he had paid the money to the signers at the time the note was executed and delivered to him.

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