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DEVELOPMENT BANK OF RIZAL vs. SIMA WEI
DEVELOPMENT BANK OF RIZAL vs. SIMA WEI
vs. SIMA WEI and/or LEE KIAN HUAT, MARY CHENG UY, SAMSON
TUNG, ASIAN INDUSTRIAL PLASTIC CORPORATION and PRODUCERS BANK OF THE PHILIPPINES
G.R. No. 85419 March 9, 1993
CAMPOS, JR., J.
Payee of a negotiable instrument acquires no interest thereto until its delivery to him.
FACTS: In consideration for a loan extended by petitioner DBP 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
P1,820,000.00 on or before June 24, 1983 with interest at 32% per annum. Sima Wei made partial
payments on the note, leaving a balance of P1,032,450.02. Subsequently, Sima Wei issued two crossed
checks payable to petitioner Bank drawn against China Banking, for P500,000 each. For reasons not
shown, these checks came into the possession of respondent Lee Kian Huat, who deposited the checks
without the petitioner-payee's indorsement (forged or otherwise) to the account of respondent Plastic
Corporation, at the Balintawak branch of the Producers Bank. Cheng Uy, Branch Manager of the said
branch, relying on the assurance of respondent Tung, President of Plastic Corporation, that the transaction
was legal and regular, instructed the cashier of Producers Bank to accept the checks for deposit and to
credit them to the account of said Plastic Corporation, inspite of the fact that the checks were crossed and
payable to petitioner Bank and bore no indorsement of the latter.
Petitioner DBP filed a complaint for a sum of money against Respondents to enforce payment of the
balance on the promissory note and two checks executed by Sima Wei to pay the balance due. Except for
Lee Kian Huat, defendants filed their separate Motions to Dismiss alleging a common ground that the
complaint states no cause of action. The trial court granted the defendants' Motions to Dismiss. CA affirmed
this decision.
ISSUE: WON Petitioner DBP acquired any interest over the undelivered checks?
HELD: NO. 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. 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. Section 16 of the Negotiable
Instruments Law, which governs checks, provides in part: Every contract on a negotiable instrument is
incomplete and revocable until delivery of the instrument for the purpose of giving effect thereto xxx.
Thus, the payee of a negotiable instrument acquires no interest with respect thereto until its delivery to him.
Delivery of an instrument means transfer of possession, actual or constructive, from one person to
another. Without the initial delivery of the instrument from the drawer to the payee, there can be no liability
on the instrument. Moreover, such delivery must be intended to give effect to the instrument.The
allegations of the petitioner in the original complaint show that the two (2) China Bank checks, were not
delivered to the payee, the petitioner herein. Without the delivery of said checks to petitioner-payee, the
former did not acquire any right or interest therein and cannot therefore assert any cause of action, founded
on said checks, whether against the drawer Sima Wei or against the Producers Bank or any of the other
respondents.
Notwithstanding the above, it does not necessarily follow that the drawer Sima Wei is freed from liability.
Her allegation that she has paid the balance of her loan with the two checks payable to petitioner Bank has
no merit for these checks were never delivered to petitioner Bank. Moreover, 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 respondent Sima Wei. However,
insofar as the other respondents are concerned, petitioner Bank has no privity with them. Since petitioner
Bank never received the checks on which it based its action against said respondents, it never owned them
(the checks) nor did it acquire any interest therein. Thus, anything which the respondents may have done
with respect to said checks could not have prejudiced petitioner Bank. 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. If at all, it is Sima Wei, the drawer, who
would have a cause of action against her co-respondents, if the allegations in the complaint are found to be
true.