FACTS:

Petitioner  sold  to  Wonderland  Food  Industries  two  parcels  of  land.    They stipulated under a Memorandum of Agreement that the terms of payment would  be  P1,000,000  in  cash,  P2,000,000  in  shares  of  stock,  and  the balance  would  be  payable  in  monthly  installments.    Thereafter,  an
addendum  was  executed  between  them,  qualifying  the  cash  payment.  Instead  of  cash  payment,  the  vendee  authorized  the  vendor  to  obtain  a loan from the financier on which the vendee bound itself to pay for.  This loan was to cover for the payment of P1,000,000.  This addendum was not notarized.
 
Petitioner  Soriano  signed  as  maker  the  promissory  notes  payable  to  the bank.  However, the petitioners failed to pay the obligations as they were due.    During  that  time,  the  bank  was  in  financial  distress  and  this prompted it to endorse the promissory notes for collection.  The bank gave ample time to petitioners then to satisfy their obligations.
 
The  trial  court  held  in  favor  of  the  bank.    It  didn't  find  merit  to  the contention  that  Wonderland  was  the  one  to  be  held  liable  for  the promissory notes.
 

HELD:

First,  there  was  no  contract  of  sale  that  materialized.    The  original agreement  was  that  Wonderland  would  pay  cash  and  petitioner  would deliver  possession  of  the  farmlands.    But  this  was  changed  through  an addendum, that petitioner would instead secure a loan and the settlement
of the same would be shouldered by Wonderland.   

Petitioners became liable as accommodation parties.  They have the right after  paying  the  instrument  to  seek  reimbursement  from  the  party accommodated, since the relation between them has in effect became one of principal and surety.   
 
Furthermore,  as  it  turned  out,  the  contract  of  surety  between  Woodland and petitioner was extinguished by the rescission of the contract of sale of the farmland.  With the rescission,  there was confusion in the persons of the  principal  debtor  and  surety.    The  addendum  thereon  likewise  lost  its
efficacy.