41. STATE INVESTMENT HOUSE, INC. v. COURT
For her part, Moulic denied having receiving any
OF APPEALS AND MOULIC
G.R. No. 101163 January 11, 1993 Bellosillo, J.
Discharge of Negotiable Instrument
DOCTRINE: The mere fact that post-dated checks
are merely issued as security is not a ground for the
discharge of the instrument as against a holder in due
course since the only grounds for the discharge is
found in Sec. 119 of the NIL, to wit: (1) By payment
in due course by or on behalf of the principal debtor;
(2) By payment in due course by the party
accommodated, where the instrument is made or
accepted for his accommodation; (3) By the
intentional cancellation thereof by the holder; (4) By
any other act which will discharge a simple contract
for the payment of money; and (5) When the
principal debtor becomes the holder of the instrument
at or after maturity in his own right.
Sec. 119 contemplates a situation where the holder of
the instrument is the creditor while its drawer is the
debtor. The intentional cancellation under Sec. 119(c)
of the NIL is the cancellation effected by destroying
the instrument either by tearing it up, burning it, or
writing the word “cancelled” on the instrument. The
act of destroying the instrument must also be made by
the holder of the instrument intentionally.
FACTS: 1. Parties: Drawer: Moulic; Payee:
Victoriano; Drawee bank: Equitable Banking
Corporation; Holder: State
2. Nora Moulic (Moulic) issued to Corazon
Victoriano (Victoriano), as security for pieces of
jewelry to be sold on commission, 2 Equitable
Banking Corporation (Equitable) post-dated checks
worth P50k each.
3. The payee negotiated the checks to State
Investment House, Inc. (State).
4. Moulic failed to sell the pieces of jewelry. Hence,
she returned them to Victoriano before the checks
matured. However, the checks could no longer be
retrieved as they were already negotiated.
Consequently, before their maturity dates, Moulic
withdrew her funds from Equitable.
5. Upon presentment for payment, the checks were
dishonored for insufficiency of funds.
6. In December 1979, State allegedly notified Moulic
of the dishonor and requested that it be paid in cash
instead.
notice of dishonor.
7. In October 1983, State sued before the RTC to recover the
value of the checks.
8. In her Answer, Moulic argued that she incurred no
obligation on the checks because the jewelry was never sold
and the checks were negotiated without her knowledge and
consent.
9. RTC: dismissed State’s complaint.
10. CA: affirmed the RTC ruling because, among other
things, the checks ceased to serve their purpose as security
for the jewelry since the sale of the jewelry was never
effected.
11. Hence, this petition.
ISSUE/S: WON the drawer is liable to a holder in due
course for the amount of the post-dated checks issued as
security.
RULING: Yes. None of the modes outlined in Sec. 119 of
the NIL is applicable in the instant case as this Section
contemplates a situation where the holder of the instrument
is the creditor while its drawer is the debtor. In the instant
case, the payee, Victoriano, was no longer Moulic’s creditor
at the time the jewelry was returned. State Investment House
is the new creditor and was found by the Court to be a
holder in due course. Correspondingly, Moulic may not
unilaterally discharge herself from her liability by the mere
expediency of withdrawing her funds from the drawee bank.
In order to discharge herself from liability, she must satisfy
any grounds mentioned in Sec 199 of NIL. However, she
failed to meet any grounds mentioned. She is, thus, liable as
she has no legal basis to excuse herself from liability on her
checks to a holder in due course.
DISPOSITIVE PORTION: WHEREFORE, the petition is
GRANTED. SO ORDERED.