Legal veil

Is the president of a corporation who issues bouncing checks in payment of corporate obligations civilly liable for the amounts of the checks? This is the question resolved in this case of Claro.

Claro was the president of a bus company (CBLTC). In the course of its operations, CBLTC purchased tires from an auto supply company (APTI) for which Claro issued two postdated checks in favor of APTI: Check No. 58832 in the amount of P151,200 dated December 15, 2000 drawn against his current account for the purchase of 24 tires received by CBLTC on August 29, 2000; and Check No. 059049 in the amount of P97, 500 dated October 30, 2000 drawn against the current account of CBLTC.

When the said checks were presented for payment on their due dates however, the same were dishonored because they were drawn against insufficient funds. Hence Claro was accused of violation of the Bouncing Checks Law (B.P.22) on two counts before the Municipal Trial Court (MTC).

After the presentation of the prosecution evidence, Claro filed a motion to dismiss the charges against him by way of demurrer to evidence. The MTC granted the demurrer, acquitted Claro, premised on reasonable doubt as to his guilt. But it ordered CBLTC through Claro to pay P248,700 representing the value of the two checks plus 12% interest from the filing of the complaint until fully paid plus the expenses of litigation.

On appeal, the Regional Trial Court (RTC) modified the decision by ordering Claro himself to pay the value of the two checks and the expenses of litigation. This ruling was affirmed by the Court of Appeals (CA).

Claro questioned the CA decision. He contended that the CA erred in affirming the RTC decision that he, as officer of the corporation is personally and civilly liable for the value of the two checks. Was Claro correct?

Yes. The CA erred in affirming the ruling of the RTC holding Claro liable for the value of the checks considering that he was acquitted of the crime charged and that the debts are clearly debts for which CBLTC should be held liable.

Juridical entities have personalities separate and distinct from its officers and stockholders. Hence under the veil of corporate fiction, the officers and stockholders are not as a rule personally liable for the obligations of the corporation except only when said veil is being used as a cloak to cover for fraud or illegality, or to work injustice. The exception however does not exist in this case. It is CBTL that has obligations to APTI for the purchase of tires. There is no agreement that Claro shall be held liable for corporation’s obligation in his personal capacity. Hence he cannot be held liable for the value of the two checks in payment of the corporation’s obligation amounting to P248,700.

Likewise Claro can not be considered liable for the personal check he issued as an accommodation party. To be liable as accommodation party, (1) he must be party to the instrument, signing as maker, drawer, acceptor or endorser; (2) he must not receive part of the consideration for the instrument but assumes liability to the other party thereto; and (3) he must sign for the purpose of lending his name or credit to enable the accommodated party to obtain credit or to raise money. The first two elements are present here. However there is insufficient evidence to show the presence of the third element. All the evidence shows is that he signed Check No. 58832 for P151, 200 which is drawn against his personal account corresponding to the value of 24 tires received by CBLTC. There is no showing when Claro issued the check and in what capacity. So it cannot just be assumed that Claro intended to lend his name to the corporation. Hence he cannot be considered as an accommodation party.

APTI should therefore file the proper civil action against CBLTC for recovery of the value of the two checks (Bautista vs. Auto Plus Traders Inc. et. al. G.R. 166405 Aug. 6, 2008).

Note: Books containing compilation of my articles on Labor Law and Criminal Law (Vols. I and II) are now available. Call tel. 7249445.

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