DELA RAMA CO V. ADMIRAL UNITED SAVINGS BANK (CIVIL)

The appeal lacks merit.

Co has not denied the authenticity and due execution of the promissory note. He however, asserts that he is not legally bound by said document because he merely acted as an accommodation party for Metro Rent. He claimed that he signed the note only for the purpose of lending his name to Metro Rent, without receiving value therefor.

The argument fails to persuade.

The document, bearing Co's signature speaks for itself. To repeat, Co has not questioned the genuineness and due execution of the note. By signing the note, CO acknowledged receipt of the loan and undertook to pay the same to Admiral. Thus, he cannot validly set up the defense that he did not receive the value of the note or any consideration therefor.

At any rate, Co's assertion that he merely acted as an accommodation party for Metro Rent cannot release him from liability under the note. An ACCOMMODATION PARTY who lends his name to enable the accommodated party to obtain credit or raise money is liable on the instrument to a holder for value even if he receives no part of the consideration. He assumes the obligation to the other party and binds himself to pay the note on its due date. By signing the note, Co thus became liable for the debt even if he had no direct personal interest in the obligation or did not receive any benefit therefrom.

A PROMISSORY NOTE is a solemn acknowledgment of a debt and a formal commitment to repay it on the date and under the conditions agreed upon by the borrower and the lender. A person who signs such an instrument is bound to honor it as a legitimate obligation duly assumed by him through the signature he affixes thereto as a token of his good faith. If he reneges on his promise without cause, he forfeits the sympathy and assistance of this Court and deserves instead its sharp repudiation.

Co is not unfamiliar with commercial transactions. He is a certified public accountant. Certainly, he fully understood the import and consequences of what he was doing when he signed the promissory note. He even mortgaged his own properties to secure payment of the koan. His disclaimer, therefore, does not inspire belief.

As to the awards of liquidated damages and attorney's fees, we acknowledge that the law allows a party to recover liquidated damages and attorney's fees under a written agreement.

The ATTORNEY'S FEES here are in the nature of liquidated damages and the stipulation therefor is aptly called a penal clause. It has been said that so long as such stipulation does not contravene law, morals, or public order, it is strictly binding upon defendant. The attorney's fees are awarded in favor of the litigant, not his counsel.

On the other hand, the law also allows parties to a contract to stipulate on liquidated damages to be paid in case of breach. A stipulation on LIQUIDATED DAMAGES is a penalty clause where the obligor assumes greater liability in case of breach of an obligation. The obligor is bound to pay the stipulated amount without need for proof on the existence and on the measure of damages caused by the breach.

Nonetheless, courts are empowered to reduce such a penalty if the same is iniquitous or unconscionable.