DEVELOPMENT BANK OF RIZAL VS. SIMA WEI

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8)  DEVELOPMENT BANK OF RIZAL VS. SIMA WEI

Development Bank of Rizal, plaintiff-petitioner, vs. Sima Wei and /oor Lee Kian Huat, Mary Cheng Uy, Samson Tung, Asian Industrial Plastic Corporation and Producers Bank of the PhilippinesG.R. No. 85419. March 9, 1993

FACTS:

Petition for review by certiorari of the decision of the Court of Appeals.
In consideration for a loan extended by petitioner Bank to respondent Sima Wei the latter executed and delivered to the former a promissory note, engaging to pay the petitioner Bank or order the amount of P 1,820,000.00 on or before June 24, 1983 with the interest at 32% per annum. Sima Wei made a partial payment on the note, leaving a balance of P 1032,450.02.

November 18, 1983, Sima Wei issued 2 crossed checks payable to petitioner Bank drawn against China Banking Corporation, one for the amount of P 550,000.00 and the other for 500,000.00. The said checks were allegedly issued in full settlement of the drawer’s account evidenced by the promissory note.

These 2 checks were not delivered to the petitioner-payee or to any of its authorized representatives.

1)     For reasons not shown, these checks came into possession of respondent Lee Kian Huat, who deposited the checks without the petitioner-payee’s indorsement to the account of respondent Plastic Plastic Corporation of the Producer’s Bank, relying on the assurance of respondent Samson Tung, President of Plastic Corporation, that the transaction was legal and regular, instructed the cashier of Producer’s Bank to accept the checks for deposit and to credit the to the account of said Plastic Corporation, in spite the fact that the checks were crossed and payable to petitioner Bank and core no endorsement of the latter. Hence, Petitioner filed the complaint as aforestated.   

On July 6, 1986, the Development Bank of Rizal filed a complaint for a sum of money against respondents on 2 causes of action:

1)     To enforce payment of the balance of P 1,032,450.02 on a promissory note executed by respondent Sima Wei on June 1983
2)     To enforce payment of 2 checks executed by Sima Wei, payable to petitioner, and drawn against the China Banking Corporation, to pay the balance due on the promissory note.

Defendants filed their Motions to dismiss alleging that the complaint states no cause of action. Trial Court granted the motions to dismiss. CA affirmed.

ISSUE: 

Whether petitioner Bank has a cause of action against any or all of the defendants, in the alternative or otherwise.

HELD:

Yes. Notwithstanding the reason below, Drawer Sima Wei is not freed from her liability to the respondent Bank.

Courts have long recognized the business custom of using printed checks where blanks are provided for the date of issuance, the name of the payee, the amount payable and the drawer's signature. All the drawer has to do when he wishes to issue a check is to properly fill up the blanks and sign it. However, the mere fact that he has done these does not give rise to any liability on his part, until and unless the check is delivered to the payee or his representative and for the payee to acquire interest thereto. A negotiable instrument, of which a check is, is not only a written evidence of a contract right but is also a species of property. Just as a deed to a piece of land must be delivered in order to convey title to the grantee, so must a negotiable instrument be delivered to the payee in order to evidence its existence as a binding contract. and even granting, the delivery of checks in payment of an obligation does not constitute payment unless they are cashed or their value is impaired through the fault of the creditor, none of these exceptions were alleged by respondents Sima Wei therefore petitioner bank has caused of action.

A cause of action is defined as an act or omission of one party in violation of the legal right or rights of another. The essential elements are:
1)     Legal right of the plaintiff,
2)     Correlative obligation of the defendant, and
3)     An act or omission of the defendant in violation of said legal right.

The normal parties to a check are the drawer, the payee and the drawee bank.

However, insofar as the other respondents are concerned, petitioner Bank has no privity with them, Since the petitioner Bank never received the checks on which it based its action against said respondents, it never owned the checks nor did acquire any interest therein. It had no right or interest in the checks which could have been violated by said respondents.. petitioner Bank has therefore no cause of action against said respondents, in the alternative or otherwise.

Note.—A check whether a manager's check or ordinary check is not a legal tender and an offer of a check in payment of a debt is not a valid tender of payment and may be refused receipt by the obligee or creditor (Roman Catholic Bishop of Malolos lnc. vs. Intermediate Appellate Court, 191 SCRA 411).

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