Dev't Bank of Rizal vs Sima Wei

DEVELOPMENT BANK OF RIZAL vs. SIMA WEI, ET AL.

G.R. No. 85419 March 9, 1993

--complete undelivered

FACTS:

Respondent Sima Wei executed and delivered to petitioner Bank a promissory note engaging to pay the
petitioner Bank or order the amount of P1,820,000.00. Sima Wei subsequently issued two crossed
checks payable to petitioner Bank drawn against China Banking Corporation in full settlement of the
drawer's account evidenced by the promissory note. These two checks however were not delivered to
the petitioner-payee or to any of its authorized representatives but instead came into the possession of
respondent Lee Kian Huat, who deposited the checks without the petitioner-payee's indorsement to the
account of respondent Plastic Corporation with Producers Bank. Inspite of the fact that the checks were
crossed and payable to petitioner Bank and bore no indorsement of the latter, the Branch Manager of
Producers Bank authorized the acceptance of the checks for deposit and credited them to the account
of said Plastic Corporation.

ISSUE:

Whether petitioner Bank has a cause of action against Sima Wei for the undelivered checks.

RULING:

No. A negotiable instrument must be delivered to the payee in order to evidence its existence as a
binding contract. Section 16 of the NIL provides that every contract on a negotiable instrument is
incomplete and revocable until delivery of the instrument for the purpose of giving effect thereto. Thus,
the payee of a negotiable instrument acquires no interest with respect thereto until its delivery to him.
Without the initial delivery of the instrument from the drawer to the payee, there can be no liability on
the instrument. Petitioner however has a right of action against Sima Wei for the balance due on the
promissory note.
PBCom vs Aruego

Philippine Bank of Commerce vs. Aruego

GR L-25836-37, 31 January 1981, 102 scra 530

--agents

FACTS:

To facilitate payment of the printing of a periodical called World Current Events., Aruego, its publisher,
obtained a credit accommodation from the Philippine Bank of Commerce. For every printing of the
periodical, the printer collected the cost of printing by drawing a draft against the bank, said draft being
sent later to Aruego for acceptance. As an added security for the payment of the amounts advanced to
the printer, the bank also required Aruego to execute a trust receipt in favor of the bank wherein
Aruego undertook to hold in trust for the bank the periodicals and to sell the same with the promise to
turn over to the bank the proceeds of the sale to answer for the payment of all obligations arising from
the draft. The bank instituted an action against Aruego to recover the cost of printing of the latters
periodical. Aruego however argues that he signed the supposed bills of exchange only as an agent of
the Philippine Education Foundation Company where he is president.

ISSUES:

Whether Aruego can be held liable by the petitioner although he signed the supposed bills of exchange
only as an agent of Philippine Education Foundation Company.

RULING:

Aruego did not disclose in any of the drafts that he accepted that he was signing as representative of the
Philippine Education Foundation Company. For failure to disclose his principal, Aruego is personally
liable for the drafts he accepted, pursuant to Section 20 of the NIL which provides that when a person
adds to his signature words indicating that he signs for or on behalf of a principal or in a representative
capacity, he is not liable on the instrument if he was duly authorized; but the mere addition of words
describing him as an agent or as filing a representative character, without disclosing his principal, does
not exempt him from personal liability.
Francisco vs CA

ADALIA FRANCISCO vs. COURT OF APPEALS, ET AL.

G.R. No. 116320 November 29, 1999

--agents

FACTS:

A. Francisco Realty & Development Corporation (AFRDC), of which petitioner Francisco is the president,
entered into a Land Development and Construction Contract with private respondent Herby Commercial
& Construction Corporation (HCCC), represented by its President and General Manager private
respondent Ong. Under the contract, HCCC was to be paid on the basis of the completed houses and
developed lands delivered to and accepted by AFRDC and the GSIS. Sometime in 1979, Ong discovered
that Diaz and Francisco, the Vice-President of GSIS, had executed and signed seven checks of various
dates and amounts payable to HCCC for completed and delivered work under the contract. Ong,
however, claims that these checks were never delivered to HCCC. It turned out that Francisco forged
the indorsement of Ong on the checks and indorsed the checks for a second time by signing her name at
the back of the checks, petitioner then deposited said checks in her savings account. A case was
brought by private respondents against petitioner to recover the value of said checks. Petitioner
however claims that she was authorized to sign Ong's name on the checks by virtue of the Certification
executed by Ong in her favor giving her the authority to collect all the receivables of HCCC from the
GSIS, including the questioned checks.

ISSUE:

Whether petitioner cannot be held liable on the questioned checks by virtue of the Certification
executed by Ong giving her the authority to collect such checks from the GSIS.

RULING:

Petitioner is liable. The Negotiable Instruments Law provides that where any person is under obligation
to indorse in a representative capacity, he may indorse in such terms as to negative personal liability.
An agent, when so signing, should indicate that he is merely signing in behalf of the principal and must
disclose the name of his principal; otherwise he shall be held personally liable. Even assuming that
Francisco was authorized by HCCC to sign Ong's name, still, Francisco did not indorse the instrument in
accordance with law. Instead of signing Ong's name, Francisco should have signed her own name and
expressly indicated that she was signing as an agent of HCCC. Thus, the Certification cannot be used by
Francisco to validate her act of forgery.