ASIA BREWERY v.

EQUITABLE PCI BANK

Facts:

From September 1996 to July 1998, 10 checks and 16 demand drafts (collectively, "instruments") were issued in the
name of Charlie Go with a total value of ₱3,785,257.38 bearing the annotation that "endorsed by PCI Bank, Ayala
Branch, All Prior Endorsement And/Or Lack of Endorsement Guaranteed." All the demand drafts, except those issued
by the Lucena City and Ozamis branches of Allied Bank, were crossed. The complaint alleged that none of the
instruments from the 1st to 6th causes of action reached Charlie Go. It allegedly fell into the hands of a certain
Raymond U. Keh, then a Sales Accounting Manager of plaintiff Asia Brewery, Inc., who’s pretending to be the payee,
Charlie S. Go. Keh succeeded in opening accounts with defendant Equitable PCI Bank in the name of Charlie Go and
deposited the said instruments in said accounts and withdrew the proceeds. Raymond Keh was charged with and
convicted of theft and ordered to pay the value of the checks, but none was collected, because he jumped bail and
left the country while the case were still being tried.

Issues:

Whether the trial court erred in dismissing the complaint for lack of cause of action.

Ruling:

Yes, the trial court committed an error in dismissing the complaint for lack of cause of action.

Under Rule 16 of the Rules of Court, the dismissal of a complaint for lack of cause of action is based on Section 1 of
Rule 33, which provides:

Section 1. Demurrer to evidence. - After the plaintiff has completed the presentation of his evidence, the defendant
may move for dismissal on the ground that upon the facts and the law the plaintiff has shown no right to relief. If his
motion is denied he shall have the right to present evidence. If the motion is granted but on appeal the order of
dismissal is reversed he shall be deemed to have waived the right to present evidence. (Emphasis supplied)

In PNB v. Spouses Rivera, it was raised by the Court that the ''dismissal due to lack of cause of action may be raised
any time after the questions of fact have been resolved on the basis of stipulations, admissions, or evidence
presented by the plaintiff." However, in this Case, it has not yet reached the pre-trial stage.

Further, the trial court failed to consider Section 16 of the Negotiable Instruments Law, which provides for cases
when instruments may have been delivered to a person other than the payee.

Sec. 16. Delivery; when effectual; when presumed. - Every contract on a negotiable instrument is incomplete and
revocable until delivery of the instrument for the purpose of giving effect thereto. As between immediate parties and
as regards a remote party other than a holder in due course, the delivery, in order to be effectual, must be made
either by or under the authority of the party making, drawing, accepting, or indorsing, as the case may he; and, in
such case, the delivery may be shown to have been conditional, or for a special purpose only, and not for the purpose
of transferring the property in the instrument. But where the instrument is in the hands of a holder in due course, a
valid delivery thereof by all parties prior to him so as to make them liable to him is conclusively presumed. And where
the instrument is no longer in the possession of a party whose signature appears thereon, a valid and intentional
delivery by him is presumed until the contrary is proved. (Emphasis supplied)

Thus, the Court granted the petition and reinstated the complaint and remanded to the RTC of Makati City for further
proceedings.
BPI v. Sps Royeca

Facts:

Spouses Reynaldo and Victoria Royeca executed and delivered to Toyota Shaw, Inc. a Promissory Note for
P577,008.00 payable in 48 equal monthly with a maturity date of August 18, 1997. The Promissory Note provides
for a penalty of 3% for every month or fraction of a month that an instalment remains unpaid. Sps. Royeca then
executed a Chattel Mortgage in favor of Toyota over a certain motor vehicle. Toyota executed a Deed of Assignment
transferring all its rights, title, and interest in the Chattel Mortgage to Far East Bank and Trust Company (FEBTC). The
petitioner claimed that the respondents failed to pay 4 monthly amortizations and sent a formal demand to
respondents on March 14, 2000 asking for the payment plus the penalty. The respondents refused to pay stating
that they had already paid their obligation to FEBTC. FETB filed a complaint to MeTC against the Sps. Royeca
demanding for the delivery of the vehicle, with an alternative of payment of P48,084.00 plus interest and/or late
payment charges at the rate of 36% per annum. The complaint was amended when FETCB merged and was absorbed
by the BPI. However, the respondents, in the Answer, replied that they have already delivered 8 postdated checks
to the Auto Financing Dept. of FETBC with acknowledgement receipt and further claimed that they did not receive
any notice that the checks were dishonoured. Considering that case, they believed in good faith that their debt has
already been paid. During trial, Mr. Vicente Magpusao testified that he had been connected with FEBTC since 1994
with the position of Account Analyst since its merged with BPI. He admitted receiving the 8 checks from the
respondents. However, 2 of these checks dishonored. He stated that the remaining two checks were not deposited
anymore due to the previous dishonor of the two checks. MeTC ruled in favour of the respondents and appealed on
RTC, who ruled in favour of the petitioner. When elevated to the CA, it reinstated the MeTC decision.

Issued:

Whether or not tender of checks constitutes payment

Ruling:

No, tender of checks does not constitute payment. The Court argued that it is a settled rule that a check is not a legal
tender, thus, does not constitute a valid tender of payment. “Since a negotiable instrument is only a substitute for
money and not money, the delivery of such an instrument does not, by itself, operate as payment. Mere delivery of
checks does not discharge the obligation under a judgment. The obligation is not extinguished and remains
suspended until the payment by commercial document is actually realized.”

The respondents therefore had to present proof, not only that they delivered the checks to the petitioner, but also
that the checks were encashed. They failed to do so and merely stated that they believed in good faith that the
checks were encashed because they were not notified of the dishonor of the checks and three years had already
lapsed since they issued the checks. However, the Court could not ignore these issue raised by the respondent.
“Reasonable banking practice and prudence dictates that, when a check given to a creditor bank in payment of an
obligation is dishonored, the bank should immediately return it to the debtor and demand its replacement or
payment lest it causes any prejudice to the drawer.” Considering that the obligation has been partially paid, the
court ruled it to be justifiable to reduce the 3% per month penalty to 12% per annum.

Thus, the Court partially granted the petition and reinstated the RTC Decision with modifications to the penalty.