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  • DEVELOPMENT BANK OF RIZAL vs. SIMA WEI

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    elaine bercenio
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    The Supreme Court ruled that the petitioner bank did not acquire any interest over two checks issued by Sima Wei as payment for a loan because the checks were never delivered to the petitioner bank. According to Philippine law, a payee acquires no interest in a negotiable instrument until it is delivered. Here, the checks came into the possession of another party instead and were deposited without the petitioner's endorsement. While Sima Wei is not freed from liability for the unpaid loan balance, the petitioner bank has no cause of action against the other respondents involving the checks since it never received or had any interest in the undelivered checks.

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    The Supreme Court ruled that the petitioner bank did not acquire any interest over two checks issued by Sima Wei as payment for a loan because the checks were never delivered to the petitioner bank. According to Philippine law, a payee acquires no interest in a negotiable instrument until it is delivered. Here, the checks came into the possession of another party instead and were deposited without the petitioner's endorsement. While Sima Wei is not freed from liability for the unpaid loan balance, the petitioner bank has no cause of action against the other respondents involving the checks since it never received or had any interest in the undelivered checks.

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    77 views2 pages

    DEVELOPMENT BANK OF RIZAL vs. SIMA WEI

    Uploaded by

    elaine bercenio
    The Supreme Court ruled that the petitioner bank did not acquire any interest over two checks issued by Sima Wei as payment for a loan because the checks were never delivered to the petitioner bank. According to Philippine law, a payee acquires no interest in a negotiable instrument until it is delivered. Here, the checks came into the possession of another party instead and were deposited without the petitioner's endorsement. While Sima Wei is not freed from liability for the unpaid loan balance, the petitioner bank has no cause of action against the other respondents involving the checks since it never received or had any interest in the undelivered checks.

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    © All Rights Reserved
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    DEVELOPMENT BANK OF RIZAL 

    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.

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