Mercantile Law

CRISOLOGO v. CA G.R. No. 80599 September 15, 1989 Accommodation Party, Negotiable Instruments Law

FACTS:

Ricardo S. Santos, Jr. was the vice-president of Mover Enterprises, Inc., and the president was Atty. Oscar Z. Benares.
Atty. Benares, in accommodation of his clients, the spouses Ong, issued a Check payable to Ernestina Crisologo-Jose. Since the check was under the account of Mover Enterprises, Inc., the same was to be signed by its president and the treasurer. However, due to the unavailability of the treasurer, Santos, signed the check.
The check was issued to Ernestina in consideration of the waiver or quitclaim over a certain property which the GSIS agreed to sell to the spouses Ong, with the understanding that upon approval by the GSIS of the compromise agreement with the spouses Ong, the check will be encashed accordingly. The compromise agreement was not approved within the expected period of time. Hence, Atty. Benares replaced the same with another check.
Ernestina filed a criminal complaint for violation of BP Blg. 22 against Atty. Benares and Santos.
The court rendered judgment dismissing the complaint.
The CA 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.

ISSUE:

Whether or not private respondent, Santos, 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.

RULING:


The pertinent provision of the Negotiable Instruments Law 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 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.

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 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.
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. 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 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.
There should be no legal obstacle, therefore, to petitioner’s claims being directed personally against Atty. Benares and respondent Santos, president and vice-president, respectively, of Mover Enterprises, Inc.

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