G.R. No.

80599 September 15, 1989

REGALADO, J.:
1

of respondent Court of Appeals, promulgated on September

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-charge of marketing and sales; and the president of the said
corporation was Atty. Oscar Z. Benares. On April 30, 1980, Atty. Benares, in
accommodation of his clients, the spouses Jaime and Clarita Ong, issued Check
No. 093553 drawn against Traders Royal Bank, dated June 14, 1980, in the
amount of P45,000.00 (Exh- 'I') 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 as an alternate story. Plaintiff Ricardo S. Santos,
Jr. did sign the check.
It appears that the check (Exh. '1') was issued to defendant Ernestina CrisologoJose 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 clients of Atty. Oscar Benares, 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. However, since
the compromise agreement was not approved within the expected period of time,
the aforesaid check for P45,000.00 (Exh. '1') was replaced by Atty. Benares with
another Traders Royal Bank cheek bearing No. 379299 dated August 10, 1980,
in the same amount of P45,000.00 (Exhs. 'A' and '2'), also payable to the
defendant Jose. 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 (Exhs. 'A' and '2') with her account at Family Savings
Bank, Mayon Branch, it was dishonored for insufficiency of funds. A subsequent
redepositing of the said check was likewise dishonored by the bank for the same
reason. Hence, defendant through counsel was constrained to file a criminal
complaint for violation of Batas Pambansa Blg. 22 with the Quezon City Fiscal's
Office against Atty. Oscar Z. Benares and plaintiff Ricardo S. Santos, Jr. The
investigating Assistant City Fiscal, Alfonso Llamas, accordingly filed an amended
information with the court charging both Oscar Benares and Ricardo S. Santos,

Jr., for violation of Batas Pambansa Blg. 22 docketed as Criminal Case No. Q14867 of then Court of First Instance of Rizal, Quezon City.
Meanwhile, during the preliminary investigation of the criminal charge against
Benares and the plaintiff herein, before Assistant City Fiscal Alfonso T. Llamas,
plaintiff Ricardo S. Santos, Jr. tendered cashier's check No. CC 160152 for
P45,000.00 dated April 10, 1981 to the defendant Ernestina Crisologo-Jose, the
complainant in that criminal case. The defendant refused to receive the cashier's
check in payment of the dishonored check in the amount of P45,000.00. Hence,
plaintiff encashed the aforesaid cashier's check and subsequently deposited said
amount of P45,000.00 with the Clerk of Court on August 14, 1981 (Exhs. 'D' and
'E'). Incidentally, the cashier's check adverted to above was purchased by Atty.
Oscar Z. Benares and given to the plaintiff herein to 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 of the Civil 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 consignation, 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 respondent, one of the signatories of the check issued under the account
of Mover Enterprises, Inc., is an accommodation party under the Negotiable
Instruments Law and a debtor of petitioner to the extent of the amount of said
check.
Petitioner avers that the accommodation party in this case is Mover Enterprises, Inc. and not
private respondent who merely signed the check in question in a representative capacity, that is,
as vice-president of said corporation, hence he is not liable 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 instrument as maker, drawer, acceptor, or indorser, without
receiving value therefor, and for the purpose of lending 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 accommodation party.
Consequently, to be considered an accommodation party, a person must (1) be a party to the
instrument, signing as maker, drawer, acceptor, or indorser, (2) not receive value therefor, and (3)
sign for the purpose of lending his name for the credit of 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 concept of a debtor therein in the sense that he has not
received any valuable consideration for the instrument he signs. Nevertheless, he is liable to a
holder for value as if the contract was not for accommodation 5 in whatever capacity such

accommodation party signed the instrument, whether primarily or secondarily. Thus, it has been
held that in lending his name to the accommodated party, the 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 inevitable question is whether or not it may be held liable on the
accommodation instrument, that is, the check issued in favor of herein petitioner.
We hold in the negative.
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. 7 This is because the issue or indorsement of
negotiable paper by a corporation without consideration and for the accommodation of another is
ultra vires. 8 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. 9
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. 10 Corollarily, 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. 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.
The instant case falls squarely within the purview of the aforesaid decisional rules. If we indulge
petitioner in her aforesaid postulation, then she is effectively barred from recovering from Mover
Enterprises, Inc. the value of the check. Be that as it may, 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, 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.
Petitioner, as hereinbefore explained, was evidently charged with the knowledge that the cheek
was issued at the instance and for the personal account of Atty. Benares who merely prevailed
upon respondent Santos to act as co-signatory in accordance with the arrangement of the
corporation with its depository bank. That it was a personal undertaking of said corporate officers
was apparent to petitioner by reason of her personal involvement in the financial arrangement
and the fact that, while it was the corporation's check which was issued to her for the amount
involved, she actually had no transaction directly with said corporation.
There should be no legal obstacle, therefore, to petitioner's claims being directed personally
against Atty. Oscar Z. Benares and respondent Ricardo S. Santos, Jr., president and vicepresident, respectively, of Mover Enterprises, Inc.

2. On her second assignment of error, petitioner argues that the Court of Appeals
erred in holding that the consignation of the sum of P45,000.00, made by private
respondent after his tender of payment was 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 proper. Concomitantly, this argument was premised on the assumption that
private respondent Santos is not an accommodation party.
As previously discussed, however, respondent Santos is an accommodation party and is,
therefore, liable for the value of the check. The fact that he was only a co-signatory does not
detract from his personal liability. 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. Under the doctrine in Philippine Bank of Commerce vs. Aruego,
supra, he is in effect a co-surety for the accommodated party with whom he and his co-signatory,
as the other co-surety, assume solidary liability ex lege for the debt involved. With the dishonor of
the check, there was created a debtor-creditor relationship, as between Atty. Benares and
respondent Santos, on the one hand, and petitioner, on the other. This circumstance enables
respondent Santos to resort to 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 circumstances, we do not thereby rule that all the operative facts for consignation
which would produce the effect of payment are present in this case. Those are factual issues that
are not clear in the records before us and which are for the Regional Trial Court of Quezon City to
ascertain in Civil Case No. Q-33160, for which reason it has advisedly been directed by
respondent court to give due course to the complaint for consignation, and which would be
subject to such issues or claims as may be raised by defendant 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 Court of Quezon City filed against private respondent for violation
of Batas Pambansa Blg. 22, by holding that no criminal liability had yet attached
to private respondent when he deposited with the court the amount of
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 own decision therein, it declared that "(t)he lone issue dwells in the question
of whether an accommodation party can validly consign the amount of the debt due with the court
after his tender of payment was refused by the creditor." Yet, from the commercial and civil law
aspects determinative of said issue, it digressed into the merits of the aforesaid Criminal Case
No. Q-14867, thus:
Section 2 of B.P. 22 establishes the prima facie evidence of knowledge of such
insufficiency of funds or credit. Thus, the making, drawing and issuance of a
check, payment of which is refused by the drawee because of insufficient funds
in or credit with such bank is prima facie evidence of knowledge of insufficiency
of funds or credit, when the check is presented within 90 days from the date of
the check.
It will be noted that the last part of Section 2 of B.P. 22 provides that the element
of knowledge of insufficiency of funds or credit is not present and, therefore, the

crime does not exist, when the drawer pays the holder the amount due or makes
arrangements for payment in full by the drawee of such check within five (5)
banking days after receiving notice that such check has not been paid by the
drawee.
Based on the foregoing consideration, this Court finds that the plaintiff-appellant
acted within Ms legal rights when he consigned the amount of P45,000.00 on
August 14, 1981, between August 7, 1981, the date when plaintiff-appellant
receive (sic) the notice of non-payment, and August 14, 1981, the date when the
debt due was deposited with the Clerk of Court (a Saturday and a Sunday which
are not banking days) intervened. The fifth banking day fell on August 14, 1981.
Hence, no criminal liability has yet attached to plaintiff-appellant when 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 another court are improper do not have to be belabored. In the latter
case, the criminal trial court has to grapple with such factual issues as, for instance, whether or
not the period of five banking days had expired, in the process determining whether notice of
dishonor should be reckoned from any prior notice if any has been given or from receipt by
private respondents of the subpoena therein with supporting affidavits, if any, or from the first day
of actual preliminary investigation; and whether there was a justification for not making the
requisite arrangements for payment in full of such check by the drawee bank within the said
period. These are matters alien to the present controversy on tender and consignation of
payment, where no such period and its legal effects are involved.
These are aside from the considerations that the disputed period involved in the criminal case is
only a presumptive rule, juris tantum at that, to determine whether or not there was knowledge of
insufficiency of funds in or credit with the drawee bank; that payment of civil liability is not a mode
for extinguishment of criminal liability; and that the requisite quantum of evidence in the two types
of cases are not the same.
To repeat, the foregoing matters are properly addressed to the trial court in Criminal Case No. Q14867, the resolution of which should not be interfered with by respondent Court of Appeals at the
present posture of said case, much less preempted by the inappropriate and unnecessary
holdings in the aforequoted portion of the decision of said respondent court. Consequently, we
modify the decision of respondent court in CA-G.R. CV No. 05464 by setting aside and declaring
without force and effect its pronouncements and findings insofar as the merits of Criminal Case
No. Q-14867 and the liability of the accused therein are concerned.
WHEREFORE, subject to the aforesaid modifications, the judgment of respondent Court of
Appeals is AFFIRMED.
SO ORDERED.