Crisologo-Jose vs. Court of Appeals

A corporate officer who co-signs a negotiable instrument of the corporation without receiving value therefor and for the purpose of lending the corporation's name to accommodate another is an accommodation party personally liable to a holder for value, and the corporation itself cannot be held liable as an accommodation party because such accommodation is ultra vires; the personal liability of the signatory gives rise to a debtor-creditor relationship that permits resort to consignation under Article 1256 of the Civil Code when the creditor refuses tender of payment.

Petitioner Ernestina Crisologo-Jose held a quitclaim over certain property that the GSIS had agreed to sell to the spouses Jaime and Clarita Ong, clients of Atty. Oscar Z. Benares, who was president of Mover Enterprises, Inc. Private respondent Ricardo S. Santos, Jr. was vice-president for marketing and sales of the same corporation. The check at issue was issued under the corporate account of Mover Enterprises, Inc., requiring the signatures of its president and treasurer. The dispute arose from the interplay between the Negotiable Instruments Law's provisions on accommodation parties, the Civil Code's rules on consignation, and a pending criminal prosecution under Batas Pambansa Blg. 22 for issuance of a bouncing check.

On April 30, 1980, Atty. Oscar Z. Benares, president of Mover Enterprises, Inc., issued Check No. 093553 drawn against Traders Royal Bank, dated June 14, 1980, in the amount of ₱45,000.00, payable to Ernestina Crisologo-Jose. The check was issued in accommodation of Atty. Benares's clients, the spouses Jaime and Clarita Ong, in consideration of petitioner's waiver or quitclaim over certain property the GSIS had agreed to sell to the Ong spouses. Because the check was drawn on the corporate account, it required the signatures of the president and the treasurer. The treasurer being unavailable, Atty. Benares prevailed upon private respondent Ricardo S. Santos, Jr., the corporation's vice-president for sales, to sign as co-signatory. Santos complied.

The check was to be encashed upon approval by the GSIS of the compromise agreement with the spouses Ong. When the compromise was not approved within the expected period, Atty. Benares replaced the original check with another Traders Royal Bank check, No. 379299, dated August 10, 1980, in the same amount of ₱45,000.00, likewise payable to petitioner and co-signed by Benares and Santos. Petitioner deposited this replacement check with her account at Family Savings Bank, Mayon Branch; it was dishonored for insufficiency of funds. A subsequent redeposit met the same fate. Petitioner, through counsel, filed a criminal complaint for violation of Batas Pambansa Blg. 22 against both Benares and Santos before the Quezon City Fiscal's Office. The investigating Assistant City Fiscal filed an amended information in Criminal Case No. Q-14867.

During the preliminary investigation, Santos tendered a cashier's check for ₱45,000.00, dated April 10, 1981, to petitioner in payment of the dishonored check. Petitioner refused to receive it. Santos then encashed the cashier's check and deposited the ₱45,000.00 with the Clerk of Court on August 14, 1981. The cashier's check had been purchased by Atty. Benares and given to Santos for application to the dishonored check.

Santos thereafter filed a complaint for consignation in the Regional Trial Court of Quezon City (Civil Case No. Q-33160). After trial, the trial court dismissed the complaint, holding that it was "not persuaded to believe that consignation referred to in Article 1256 of the Civil Code is applicable to this case," and likewise dismissed petitioner's counterclaim. On appeal, the Court of Appeals reversed, revived the complaint for consignation, and directed the trial court to give due course thereto. The CA also rendered findings on the pending criminal case, concluding that no criminal liability had yet attached to Santos when he deposited the amount on August 14, 1981, because the fifth banking day after notice of dishonor fell on that same date. Petitioner sought annulment of the CA decision before the Supreme Court.

• Accommodation Party Liability: Petitioner contended that the accommodation party was Mover Enterprises, Inc. and not private respondent Santos, who merely signed in a representative capacity as vice-president, hence Santos was not liable under the Negotiable Instruments Law.
• Propriety of Consignation: Petitioner argued that no creditor-debtor relationship existed between the parties because Santos was not an accommodation party, and therefore consignation under Article 1256 of the Civil Code was improper.
• Prejudgment of Criminal Case: Petitioner asserted that the Court of Appeals virtually prejudged Criminal Case No. Q-14867 by holding that no criminal liability had yet attached to Santos when he consigned the amount, thereby intruding into the merits of a case pending in another court.

• Accommodation Party Status: Whether private respondent Santos, who co-signed a corporate check without receiving value therefor, is an accommodation party personally liable on the instrument under the Negotiable Instruments Law.
• Propriety of Consignation: Whether consignation of the sum of ₱45,000.00 under Article 1256 of the Civil Code was proper given the alleged absence of a creditor-debtor relationship between the parties.
• Intrusion into Criminal Case: Whether the Court of Appeals improperly prejudged the pending BP 22 criminal case by ruling on the attachment of criminal liability.

• Accommodation Party Status: Yes. Santos is an accommodation party personally liable to petitioner as a holder for value. A corporation cannot be held liable as an accommodation party because accommodation is ultra vires; the signatories who lent the corporation's name for a personal undertaking are personally liable.
• Propriety of Consignation: Yes. The debtor-creditor relationship created by Santos's accommodation party status permits resort to consignation under Article 1256 when the creditor refused tender of payment. Whether all operative facts for consignation to produce the effect of payment are present is for the trial court to ascertain.
• Intrusion into Criminal Case: Yes. The Court of Appeals went beyond the ratiocination called for in the civil appeal by ruling on the merits of the pending criminal case. Those pronouncements were set aside and declared without force and effect.

• Accommodation Party Status: Section 29 of the Negotiable Instruments Law defines an accommodation party as one who signs an instrument as maker, drawer, acceptor, or indorser without receiving value therefor and for the purpose of lending his name to some other person. The requisites are: (1) being a party to the instrument signing in one of the enumerated capacities, (2) not receiving value therefor, and (3) signing to lend credit to another. Santos satisfied all three: he co-signed the check, received no value, and signed to accommodate Atty. Benares's personal undertaking. Petitioner argued the corporation was the accommodation party, but the Court held that corporations cannot be accommodation parties because issuing negotiable paper without consideration and for accommodation is ultra vires. One who takes the instrument with knowledge of its accommodation nature cannot recover against the corporation. As an exception, a corporate officer may execute accommodation paper in the corporation's name only if specifically authorized. Since the accommodation was for the personal account of Atty. Benares and Santos, and petitioner was aware of this—having had no direct transaction with the corporation—the signatories are personally liable. A co-maker or co-drawer in such circumstances is as much an accommodation party as the other co-signatory, assuming solidary liability as a co-surety for the accommodated party.

• Propriety of Consignation: Because Santos was held to be an accommodation party, a debtor-creditor relationship was created between him and Atty. Benares, on one hand, and petitioner, on the other, upon dishonor of the check. This relationship enabled Santos to resort to consignation under Article 1256 of the Civil Code after petitioner refused his tender of payment. The Court cautioned, however, that it was not ruling that all operative facts for consignation producing the effect of payment were present; those are factual issues for the trial court to ascertain in the revived Civil Case No. Q-33160, subject to such issues, claims, and counterclaim as may be raised by the parties.

• Intrusion into Criminal Case: The Court sustained petitioner on this point. The Court of Appeals had defined the lone issue in the civil appeal as whether an accommodation party can validly consign the amount due after tender was refused, yet it digressed into the merits of Criminal Case No. Q-14867, analyzing Section 2 of B.P. 22 and concluding that no criminal liability had attached. The Court held this intrusion improper: the criminal trial court must independently determine factual issues such as whether the five-banking-day period had expired, from when notice of dishonor should be reckoned, and whether there was justification for not making arrangements for payment. These matters are alien to the civil controversy on tender and consignation. The disputed period in the criminal case is merely a presumptive rule, juris tantum, to determine knowledge of insufficiency of funds; payment of civil liability is not a mode for extinguishing criminal liability; and the quantum of evidence differs between civil and criminal cases. The CA's pronouncements on the criminal case were set aside and declared without force and effect.

• Accommodation Party (Section 29, Negotiable Instruments Law) — An accommodation party is one who signs an instrument as maker, drawer, acceptor, or indorser without receiving value therefor and for the purpose of lending his name to some other person. The requisites are: (1) being a party to the instrument signing in one of the enumerated capacities, (2) not receiving value therefor, and (3) signing for the purpose of lending his name for the credit of some other person. The accommodation party is liable to a holder for value as if the contract was not for accommodation, and is in effect a surety for the accommodated party. The Court applied this by holding Santos personally liable as a co-signatory who lent his name without receiving value.

• Corporate Accommodation is Ultra Vires — A corporation cannot be an accommodation party because the issue or indorsement of negotiable paper by a corporation without consideration and for the accommodation of another is ultra vires. One who takes the instrument with knowledge of its accommodation nature cannot recover against the corporation. As an exception, a corporate officer may execute accommodation paper in the corporation's name only if specifically authorized. Where the accommodation is for the personal account of the corporate officers and the creditor is aware thereof, the signatories are personally liable. The Court applied this by holding that since the check was issued for the personal undertaking of Atty. Benares and Santos, and petitioner knew this, the signatories—not the corporation—are personally liable.

• Co-Surety Liability of Co-Signatories — Under the doctrine in Philippine Bank of Commerce vs. Aruego, co-signatories of an accommodation instrument are co-sureties for the accommodated party, assuming solidary liability ex lege for the debt involved. The Court applied this to hold both Benares and Santos solidarily liable as accommodation parties.

• Consignation Under Article 1256, Civil Code — Consignation is proper where a creditor refuses tender of payment, provided a debtor-creditor relationship exists. The Court held that the accommodation party status of Santos created such a relationship upon dishonor of the check, permitting consignation. However, whether all operative facts for consignation to produce the effect of payment are present remains a factual question for the trial court.

• "The aforequoted provision of the Negotiable Instruments Law which holds an 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 passage articulates the ultra vires doctrine as applied to corporate accommodation parties, a foundational rule distinguishing corporate from personal liability on negotiable instruments.

• "Corporate officers, such as the president and vice-president, 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." — This defines the limitation on corporate officers' authority to bind the corporation for accommodation purposes and establishes the basis for their personal liability.

• "The fact that for lack of capacity the corporation is not bound by an accommodation paper does not thereby absolve, but should render personally liable, the signatories of said instrument where the facts show that the accommodation involved was for their personal account, undertaking or purpose and the creditor was aware thereof." — This states the ratio decidendi on the personal liability of corporate signatories when the accommodation is for their personal account and the creditor has knowledge thereof.

• "A co-maker or co-drawer under the circumstances in this case is as much an accommodation party as the other co-signatory or, for that matter, as a lone signatory in an accommodation instrument." — This establishes that co-signatories share equal accommodation party status and solidary liability, precluding any defense based on being merely a secondary signatory.

• Ang Tiong vs. Ting, et al., 22 SCRA 713 (1968) — Cited for the proposition that an accommodation party is liable on the instrument to a holder for value as if the contract was not for accommodation, in whatever capacity the accommodation party signed.

• Philippine Bank of Commerce vs. Aruego, 102 SCRA 530 (1981) — Cited for the doctrine that an accommodation party, in lending his name to the accommodated party, is in effect a surety, and that co-signatories are co-sureties assuming solidary liability ex lege.

• Oppenheim vs. Simon Reigel Cigar Co., 90 N.Y.S. 355 — Cited through 11 C.J.S. 309 for the rule that one who takes an instrument with knowledge of its accommodation nature cannot recover against the corporation thereon.

• Section 29, Negotiable Instruments Law — Defines an accommodation party as one who signs as maker, drawer, acceptor, or indorser without receiving value therefor and for the purpose of lending his name to another. Applied to hold Santos personally liable as a co-signatory who received no value and signed to accommodate Atty. Benares.

• Article 1256, Civil Code — Governs consignation when the creditor refuses tender of payment. Applied to permit Santos's resort to consignation upon petitioner's refusal, the debtor-creditor relationship having arisen from his accommodation party liability.

• Section 2, Batas Pambansa Blg. 22 — Establishes prima facie evidence of knowledge of insufficiency of funds and provides a five-banking-day period within which the drawer may pay or arrange payment to avoid criminal liability. The CA's application of this provision was held improper in the civil appeal, as the matter pertains to the criminal case pending in another court.

Paras, Padilla, and Sarmiento, JJ., concurred. Melencio-Herrera, J., took no part.