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Republic of the Philippines SUPREME COURT Manila SECOND DIVISION

G.R. No. 80599 September 15, 1989

ERNESTINA CRISOLOGO-JOSE, petitioner, vs. COURT OF APPEALS and RICARDO S. SANTOS, JR. in his own behalf and as Vice-President for Sales of Mo Enterprises, Inc., respondents. Melquiades P. de Leon for petitioner. Rogelio A. Ajes for private respondent.

REGALADO, J.:

Petitioner seeks the annulment of the decision 1 of respondent Court of Appeals, promulgated on September 8, 1987 reversed the decision of the trial Court 2 dismissing the complaint for consignation filed by therein plaintiff Ricardo S. The parties are substantially agreed on the following facts as found by both lower courts:

In 1980, plaintiff Ricardo S. Santos, Jr. was the vice-president of Mover Enterprises, Inc. in-ch marketing and sales; and the president of the said corporation was Atty. Oscar Z. Benares. O 1980, Atty. Benares, in accommodation of his clients, the spouses Jaime and Clarita Ong, iss No. 093553 drawn against Traders Royal Bank, dated June 14, 1980, in the amount of P45,00 'I') payable to defendant Ernestina Crisologo-Jose. Since the check was under the account of Enterprises, Inc., the same was to be signed by its president, Atty. Oscar Z. Benares, and the the said corporation. However, since at that time, the treasurer of Mover Enterprises was not a Atty. Benares prevailed upon the plaintiff, Ricardo S. Santos, Jr., to sign the aforesaid chEck a alternate story. Plaintiff Ricardo S. Santos, Jr. did sign the check.

It appears that the check (Exh. '1') was issued to defendant Ernestina Crisologo-Jose in consi the waiver or quitclaim by said defendant over a certain property which the Government Servi Insurance System (GSIS) agreed to sell to the clients of Atty. Oscar Benares, the spouses Jai Clarita Ong, with the understanding that upon approval by the GSIS of the compromise agree the spouses Ong, the check will be encashed accordingly. However, since the compromise ag

was not approved within the expected period of time, the aforesaid check for P45,000.00 (Exh replaced by Atty. Benares with another Traders Royal Bank cheek bearing No. 379299 dated 1980, in the same amount of P45,000.00 (Exhs. 'A' and '2'), also payable to the defendant Jos replacement check was also signed by Atty. Oscar Z. Benares and by the plaintiff Ricardo S. When defendant deposited this replacement check (Exhs. 'A' and '2') with her account at Fam Bank, Mayon Branch, it was dishonored for insufficiency of funds. A subsequent redepositing check was likewise dishonored by the bank for the same reason. Hence, defendant through c constrained to file a criminal complaint for violation of Batas Pambansa Blg. 22 with the Quezo Fiscal's Office against Atty. Oscar Z. Benares and plaintiff Ricardo S. Santos, Jr. The investig Assistant City Fiscal, Alfonso Llamas, accordingly filed an amended information with the court both Oscar Benares and Ricardo S. Santos, Jr., for violation of Batas Pambansa Blg. 22 dock Criminal Case No. Q-14867 of then Court of First Instance of Rizal, Quezon City.

Meanwhile, during the preliminary investigation of the criminal charge against Benares and the pla before Assistant City Fiscal Alfonso T. Llamas, plaintiff Ricardo S. Santos, Jr. tendered cashier's c 160152 for P45,000.00 dated April 10, 1981 to the defendant Ernestina Crisologo-Jose, the compl criminal case. The defendant refused to receive the cashier's check in payment of the dishonored amount of P45,000.00. Hence, plaintiff encashed the aforesaid cashier's check and subsequently d said amount of P45,000.00 with the Clerk of Court on August 14, 1981 (Exhs. 'D' and 'E'). Incidenta cashier's check adverted to above was purchased by Atty. Oscar Z. Benares and given to the plain be applied in payment of the dishonored check. 3

After trial, the court a quo, holding that it was "not persuaded to believe that consignation referred to in Article 1256 o Code is applicable to this case," rendered judgment dismissing plaintiff s complaint and defendant's counterclaim. 4

As earlier stated, respondent court reversed and set aside said judgment of dismissal and revived the complaint for c directing the trial court to give due course thereto. Hence, the instant petition, the assignment of errors wherein are prefatorily stated and discussed seriatim.

1. Petitioner contends that respondent Court of Appeals erred in holding that private responde the signatories of the check issued under the account of Mover Enterprises, Inc., is an accom party under the Negotiable Instruments Law and a debtor of petitioner to the extent of the amo check.

Petitioner avers that the accommodation party in this case is Mover Enterprises, Inc. and not private respondent who signed the check in question in a representative capacity, that is, as vice-president of said corporation, hence he is n thereon under the Negotiable Instruments Law. The pertinent provision of said law referred to provides:

Sec. 29. Liability of accommodation party an accommodation party is one who has signed the as maker, drawer, acceptor, or indorser, without receiving value therefor, and for the purpose his name to some other person. Such a person is liable on the instrument to a holder for value notwithstanding such holder, at the time of taking the instrument, knew him to be only an acco party.

Consequently, to be considered an accommodation party, a person must (1) be a party to the instrument, signing as drawer, acceptor, or indorser, (2) not receive value therefor, and (3) sign for the purpose of lending his name for the c some other person.

Based on the foregoing requisites, it is not a valid defense that the accommodation party did not receive any valuable

consideration when he executed the instrument. From the standpoint of contract law, he differs from the ordinary con debtor therein in the sense that he has not received any valuable consideration for the instrument he signs. Neverthe liable to a holder for value as if the contract was not for accommodation 5in whatever capacity such accommodation p the instrument, whether primarily or secondarily. Thus, it has been held that in lending his name to the accommodate accommodation party is in effect a surety for the latter. 6

Assuming arguendo that Mover Enterprises, Inc. is the accommodation party in this case, as petitioner suggests, the question is whether or not it may be held liable on the accommodation instrument, that is, the check issued in favor o petitioner. We hold in the negative.

The aforequoted provision of the Negotiable Instruments Law which holds an accommodation party liable on the instr holder for value, although such holder at the time of taking the instrument knew him to be only an accommodation pa include nor apply to corporations which are accommodation parties. 7 This is because the issue or indorsement of ne paper by a corporation without consideration and for the accommodation of another is ultra vires. 8 Hence, one who h instrument with knowledge of the accommodation nature thereof cannot recover against a corporation where it is only accommodation party. If the form of the instrument, or the nature of the transaction, is such as to charge the indorsee knowledge that the issue or indorsement of the instrument by the corporation is for the accommodation of another, he recover against the corporation thereon. 9

By way of exception, an officer or agent of a corporation shall have the power to execute or indorse a negotiable pap name of the corporation for the accommodation of a third person only if specifically authorized to do so. 10 Corollarily, officers, such as the president and vice-president, have no power to execute for mere accommodation a negotiable in the corporation for their individual debts or transactions arising from or in relation to matters in which the corporation legitimate concern. Since such accommodation paper cannot thus be enforced against the corporation, especially sin involved in any aspect of the corporate business or operations, the inescapable conclusion in law and in logic is that t signatories thereof shall be personally liable therefor, as well as the consequences arising from their acts in connectio

The instant case falls squarely within the purview of the aforesaid decisional rules. If we indulge petitioner in her afore postulation, then she is effectively barred from recovering from Mover Enterprises, Inc. the value of the check. Be tha petitioner is not without recourse.

The fact that for lack of capacity the corporation is not bound by an accommodation paper does not thereby absolve, render personally liable, the signatories of said instrument where the facts show that the accommodation involved wa personal account, undertaking or purpose and the creditor was aware thereof.

Petitioner, as hereinbefore explained, was evidently charged with the knowledge that the cheek was issued at the ins for the personal account of Atty. Benares who merely prevailed upon respondent Santos to act as co-signatory in acc with the arrangement of the corporation with its depository bank. That it was a personal undertaking of said corporate was apparent to petitioner by reason of her personal involvement in the financial arrangement and the fact that, while corporation's check which was issued to her for the amount involved, she actually had no transaction directly with sai corporation.

There should be no legal obstacle, therefore, to petitioner's claims being directed personally against Atty. Oscar Z. Be respondent Ricardo S. Santos, Jr., president and vice-president, respectively, of Mover Enterprises, Inc.

2. On her second assignment of error, petitioner argues that the Court of Appeals erred in hol consignation of the sum of P45,000.00, made by private respondent after his tender of payme refused by petitioner, was proper under Article 1256 of the Civil Code.

Petitioner's submission is that no creditor-debtor relationship exists between the parties, hence consignation is not pr

Concomitantly, this argument was premised on the assumption that private respondent Santos is not an accommoda

As previously discussed, however, respondent Santos is an accommodation party and is, therefore, liable for the valu check. The fact that he was only a co-signatory does not detract from his personal liability. A co-maker or co-drawer u circumstances in this case is as much an accommodation party as the other co-signatory or, for that matter, as a lone in an accommodation instrument. Under the doctrine in Philippine Bank of Commerce vs. Aruego, supra, he is in effe surety for the accommodated party with whom he and his co-signatory, as the other co-surety, assume solidary liabili for the debt involved. With the dishonor of the check, there was created a debtor-creditor relationship, as between At and respondent Santos, on the one hand, and petitioner, on the other. This circumstance enables respondent Santos an action of consignation where his tender of payment had been refused by petitioner.

We interpose the caveat, however, that by holding that the remedy of consignation is proper under the given circums do not thereby rule that all the operative facts for consignation which would produce the effect of payment are presen case. Those are factual issues that are not clear in the records before us and which are for the Regional Trial Court o City to ascertain in Civil Case No. Q-33160, for which reason it has advisedly been directed by respondent court to gi course to the complaint for consignation, and which would be subject to such issues or claims as may be raised by de and the counterclaim filed therein which is hereby ordered similarly revived.

3. That respondent court virtually prejudged Criminal Case No. Q-14687 of the Regional Trial Quezon City filed against private respondent for violation of Batas Pambansa Blg. 22, by hold criminal liability had yet attached to private respondent when he deposited with the court the a P45,000.00 is the final plaint of petitioner. We sustain petitioner on this score.

Indeed, respondent court went beyond the ratiocination called for in the appeal to it in CA-G.R. CV. No. 05464. In its decision therein, it declared that "(t)he lone issue dwells in the question of whether an accommodation party can valid the amount of the debt due with the court after his tender of payment was refused by the creditor." Yet, from the com civil law aspects determinative of said issue, it digressed into the merits of the aforesaid Criminal Case No. Q-14867,

Section 2 of B.P. 22 establishes the prima facie evidence of knowledge of such insufficiency o credit. Thus, the making, drawing and issuance of a check, payment of which is refused by the because of insufficient funds in or credit with such bank is prima facie evidence of knowledge insufficiency of funds or credit, when the check is presented within 90 days from the date of th

It will be noted that the last part of Section 2 of B.P. 22 provides that the element of knowledg insufficiency of funds or credit is not present and, therefore, the crime does not exist, when the pays the holder the amount due or makes arrangements for payment in full by the drawee of s within five (5) banking days after receiving notice that such check has not been paid by the dr

Based on the foregoing consideration, this Court finds that the plaintiff-appellant acted within Ms le when he consigned the amount of P45,000.00 on August 14, 1981, between August 7, 1981, the d plaintiff-appellant receive (sic) the notice of non-payment, and August 14, 1981, the date when the was deposited with the Clerk of Court (a Saturday and a Sunday which are not banking days) inter fifth banking day fell on August 14, 1981. Hence, no criminal liability has yet attached to plaintiff-ap he deposited the amount of P45,000.00 with the Court a quo on August 14, 1981. 11

That said observations made in the civil case at bar and the intrusion into the merits of the criminal case pending in a are improper do not have to be belabored. In the latter case, the criminal trial court has to grapple with such factual is instance, whether or not the period of five banking days had expired, in the process determining whether notice of dis should be reckoned from any prior notice if any has been given or from receipt by private respondents of the subpoen with supporting affidavits, if any, or from the first day of actual preliminary investigation; and whether there was a just

not making the requisite arrangements for payment in full of such check by the drawee bank within the said period. T matters alien to the present controversy on tender and consignation of payment, where no such period and its legal e involved.

These are aside from the considerations that the disputed period involved in the criminal case is only a presumptive r tantum at that, to determine whether or not there was knowledge of insufficiency of funds in or credit with the drawee payment of civil liability is not a mode for extinguishment of criminal liability; and that the requisite quantum of eviden types of cases are not the same.

To repeat, the foregoing matters are properly addressed to the trial court in Criminal Case No. Q-14867, the resolutio should not be interfered with by respondent Court of Appeals at the present posture of said case, much less preempt inappropriate and unnecessary holdings in the aforequoted portion of the decision of said respondent court. Consequ modify the decision of respondent court in CA-G.R. CV No. 05464 by setting aside and declaring without force and ef pronouncements and findings insofar as the merits of Criminal Case No. Q-14867 and the liability of the accused ther concerned. WHEREFORE, subject to the aforesaid modifications, the judgment of respondent Court of Appeals is AFFIRMED. SO ORDERED. Paras, Padilla and Sarmiento, JJ., concur. Melencio-Herrera J., took no part.

Footnotes

1 Penned by Justice Justo P. Torres, Jr. and concurred in by Associate Justices Leonor Ines L Oscar M. Herrera; Rollo, 18. 2 Civil Case No. Q-33160, Regional Trial Court of Quezon City, Branch XCVI. 3 Rollo, 19-20. 4 Rollo, 18. 5 Ang Tiong vs. Ting, et al., 22 SCRA 713 (1968). 6 Philipine Bank of Commerce vs. Aruego, 102 SCRA 530 (1981). 7 11 C.J.S. 309. 8 14A C.J. 732. 9 Oppenheim vs. Simon Reigel Cigar Co., 90 N.Y.S. 355, cited in 11 C.J.S. 309.

10 In re Wrentham Mfg. Co., 2 Low. 119; Hall vs. Auburn Turnp. Co., 27 Cal. 255, cited in 14A 11 Rollo, 21-22.

CRISOLOGO-JOSE
Facts: Plaintiff Ricardo S. Santos, Jr. was the vice-president of Mover Enterprises, Inc. in-charge of marketing and sales; and the president of the said corporation was Atty. Oscar Z. Benares. Atty. Benares, in accommodation of his clients, the spouses Jaime and Clarita Ong, issued check against Traders Royal Bank, payable to defendant Ernestina Crisologo-Jose. Since the check was under the account of Mover Enterprises, Inc., the same was to be signed by its president, Atty. Oscar Z. Benares, and the treasurer of the said corporation. However, since at that time, the treasurer of Mover Enterprises was not available, Atty. Benares prevailed upon the plaintiff, Ricardo S. Santos, Jr., to sign the aforesaid check. The check was issued to defendant Ernestina Crisologo-Jose in consideration of the waiver or quitclaim by said defendant over a certain property which the Government Service Insurance System (GSIS) agreed to sell to the spouses Jaime and Clarita Ong, with the understanding that upon approval by the GSIS of the compromise agreement with the spouses Ong, the check will be encashed accordingly. Since the compromise agreement was not approved within the expected period of time, the aforesaid check was replaced by Atty. Benares. This replacement check was also signed by Atty. Oscar Z. Benares and by the plaintiff Ricardo S. Santos, Jr. When defendant deposited this replacement check with her account at Family Savings Bank, Mayon Branch, it was dishonored for insufficiency of funds. The petitioner filed an action against the corporation for accommodation party. Issue: WON the corporation can be held liable as accommodation party? Held: No. Accommodation party liable on the instrument to a holder for value, although such holder at the time of taking the instrument knew him to be only an accommodation party, does not include nor apply to corporations which are accommodation parties. This is because the issue or indorsement of negotiable paper by a corporation without consideration and for the accommodation of another is ultra vires. Hence, one who has taken the instrument with knowledge of the accommodation nature thereof cannot recover against a corporation where it is only an accommodation party. If the form of the instrument, or the nature of the transaction, is such as to charge the indorsee with knowledge that the issue or indorsement of the instrument by the corporation is for the accommodation of another, he cannot recover against the corporation thereon. By way of exception, an officer or agent of a corporation shall have the power to execute or indorse a negotiable paper in the name of the corporation for the accommodation of a third person only if specifically authorized to do so. Corollarily, corporate officers, such as the president and vicepresident, have no power to execute for mere accommodation a negotiable instrument of the corporation for their individual debts or transactions arising from or in relation to matters in which the corporation has no legitimate concern. Since such accommodation paper cannot thus be enforced against the corporation, especially since it is not involved in any aspect of the corporate business or operations, the inescapable conclusion in law and in logic is that the signatories thereof shall be

personally liable therefor, as well as the consequences arising from their acts in connection therewith.