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028 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 PHIL.
GR No. 85419 and March 9, 1993
Topic: DELIVERY of Instrument; When does payee acquire interest; liability on the instrument
Ponente: CAMPOS, JR., J.
DOCTRINE: The payee 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.
FACTS: In consideration of a loan extended by DBP to SIMA WEI, the latter executed and delivered to
DBP a promissory note, engaging to pay DBP or order, the amount of Php1.820M, on or before June
24, 1983 at 32% per annum. SIMA WEI made partial payments on the note, and left a balance of
P1,032,450.02. On NOV. 18, 1983, SIMA WEI issued two crossed checks payable to DBP, drawn
against China Banking Corp. (CHINA BANK). Check # 1 for Php550k had serial number 384934, while
Check #2 for Php 500k had serial no. 384935. Said checkers were allegedly issued for the full
settlement of drawers (SIMA WEIs) account evidenced by the promissory note to DBP. The two
checks were not delivered to petitioner-payee DBP or any of its authorized reps. For reasons not
shown, the check came to the possession of LEE KIAN HUAT, who deposited the checks without
petitioner-payee DBPs indorsement (forged or otherwise) to the account of respondent PLASTIC
CORP at the Balintawak branch, Caloocan City, of PRODUCERS BANK.
CHENG UY, Branch Manager of said branch of PRODUCERS BANK, relying on the assurance of
SAMSON TUNG (President of PLASTIC CORP) that the transaction was legal and regular, instructed
the cashier of PRODUCERS BANK to accept the check for deposit, and credit them to PLASTIC
CORPs account, despite the fact that the checks are crossed and payable to DBP and bore no
indorsement of the latter. Hence, on July 6, 1986, DBP filed a complaint for a sum of money against
SIMA WEI et al. and the PRODUCERS BANK of the Phil., on two causes of action: (1) To enforce
payment of the balance of P1,032,450.02 on a promissory note executed by respondent SIMA WEI on
June 9, 1983; and (2) To enforce payment of two (2) checks executed by SIMA WEI payable to DBP,
and drawn against the CHINA BANKing Corporation, to pay the balance due on the promissory note.
SIMA WEI et al. (except Lee Kian Huat) filed their separate Motions to Dismiss (MTD) alleging a
common ground that the complaint states no cause of action. TRIAL COURT granted the defendants'
SIMA WEI et als MTD. CA affirmed this decision, * to which DBP, represented by its Legal Liquidator,
filed this Petition for Review by Certiorari, assigning the ff. alleged CA errors: (1) When it held that
DBP has no cause of action against SIMA WEI et al.; (2) When it held that Sec. 13, Rule of of the
Revised Rules of Court on Alternative Defendants is not applicable to herein defendants-respondents
(SIMA WEI et al.)
ISSUE: Whether DBP has any right or interest (cause of action) founded on the two (2) checks issued
by SIMA WEI. NO. The checks were not delivered to the payee DBP, so it did not acquire any
right or interest founded on such checks. However, SC held that SIMA WEI is still liable to pay the
balance, as the checks, undelivered to the payee, did not constitute as payment of her balance.
DISPOSITIVE PORTION: In the light of the foregoing, the judgment of the Court of Appeals dismissing
the petitioner's complaint is AFFIRMED insofar as the second cause of action is concerned. On the
first cause of action, the case is REMANDED to the trial court for a trial on the merits, consistent with
this decision, in order to determine whether respondent Sima Wei is liable to the Development Bank of
Rizal for any amount under the promissory note allegedly signed by her. SO ORDERED.