A criminal complaint for violation of B.P. 22 was filed by Foton Motors (Foton), an entity engaged in the business of car dealership, against Pura Felipe (Pura) with the Office of the City Prosecutor of Quezon City. The Office found probable cause to indict Pura and filed an information before the Metropolitan Trial Court (MeTC) of Quezon City, for her issuance of a postdated check in the amount of P1,020,000.00 which was subsequently dishonored upon presentment due to “Stop Payment.”
Pura issued the check because her son, Freddie, attracted by a huge discount of P220,000.00, purchased a Foton Blizzard 4×2 from Foton. The term of the transaction was Cash-on-Delivery and no downpayment was required. The car was delivered on May 14, 1997, but Freddie failed to pay upon delivery. Despite non-payment, Freddie took possession of the vehicle.
Pura was eventually acquitted of the charge of violating B.P. 22 but was found civilly liable for the amount of the check plus legal interest. Pura appealed the decision as regards the civil liability, claiming that there was no privity of contract between Foton and Pura. No civil liability could be adjudged against her because of her acquittal from the criminal charge. It was Freddie who was civilly liable to Foton, Pura claimed. Pura added that she could not be an accommodation party either because she only came in after Freddie failed to pay the purchase price, or six (6) months after the execution of the contract between Foton and Freddie. Her liability was limited to her act of issuing a worthless check, but by her acquittal in the criminal charge, there was no more basis for her to be held civilly liable to Foton. Pura’s act of issuing the subject check did not, by itself, assume the obligation of Freddie to Foton or automatically make her a party to the contract. Is Pura liable? (5%)
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Yes, Pura is civilly liable to Foton Motors. Under Section 29 of the Negotiable Instruments Law, an accommodation party is liable to a holder for value, even if the holder knew of the accommodation. Under Section
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Quick check
Is an accommodation drawer liable on a postdated check issued to secure a third party's pre-existing debt?
Under Section 29 of the Negotiable Instruments Law, an accommodation party is liable to a holder for value.
Does a pre-existing debt of a third person constitute valuable consideration for issuing a negotiable check under Act 2031?
Section 25 explicitly provides that an antecedent or pre-existing debt constitutes valuable consideration.
Does an acquittal in a criminal prosecution under Batas Pambansa Blg. 22 extinguish the drawer's civil liability on the check?
Acquittal does not extinguish civil liability unless the judgment declares the underlying fact non-existent.
What is the primary legal obligation of an accommodation maker or drawer under Philippine negotiable instruments law?
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Which primary statute governs negotiable instruments, accommodation party liabilities, and holder for value rules in the Philippines?
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1. Accommodation Party Liability
Under Section 29 of the Negotiable Instruments Law (Act Number 2031), an accommodation party is one who signs an instrument as maker, drawer, acceptor, or endorser without receiving value therefor, and for the purpose of lending their name to some other person. The accommodation party is liable on the instrument to a holder for value, notwithstanding that such holder, at the time of taking the instrument, knew them to be only an accommodation party. The absence of direct contractual privity between the accommodation party and the creditor does not defeat liability on the negotiable instrument.
2. Pre-Existing Debt Value
Under Section 25 of the Negotiable Instruments Law, an antecedent or pre-existing debt constitutes valuable consideration for the issuance of a negotiable check. Where a third party issues a check to pay or guarantee the pre-existing contractual obligation of another person, the underlying pre-existing debt serves as valid consideration. The payee who receives the check in settlement or security of the prior obligation becomes a holder for value, entitled to enforce the instrument against the accommodation drawer even if the check was issued months after the primary contract.
3. Civil Liability Acquittal
Under Rule 111 of the Revised Rules of Criminal Procedure and established Philippine civil jurisprudence, the acquittal of an accused in a criminal prosecution for violation of Batas Pambansa Blg. 22 does not automatically extinguish civil liability. Unless the judgment of acquittal explicitly declares that the quantum of fact from which the civil liability might arise did not exist, the court may adjudge civil liability against the drawer based on the underlying contractual obligation or instrument, because the civil action for recovery of the check value remains fully enforceable.