A.M. No. RTJ-88-246 - IN RE: Marcelo G. Garcia

Manuel C. Ubas, Sr. (petitioner) filed a Complaint for Sum of Money with Application for Writ of Attachment against Wilson Chan (respondent) before the Regional Trial Court (RTC) of Catarman, Northern Samar, Branch 19, docketed as Civil Case No. C-1071.
Petitioner alleged that respondent, doing business under the name UNIMASTER, was indebted to him in the amount of P1,500,000.00 for boulders, sand, gravel, and other construction materials purchased for the Macagtas Dam project in Barangay Macagtas, Catarman, Northern Samar.
The obligation was allegedly due and demandable, but respondent refused to pay despite repeated demands.

Respondent issued three (3) bank checks payable to “CASH” of P500,000.00 each on January 31, 1998, March 13, 1998, and April 3, 1998 (subject checks).
The checks were presented for encashment on June 29, 1998 but were dishonored due to a stop payment order.
Petitioner claimed fraud on respondent’s part for incurring the obligation without intention to pay.
Petitioner testified to a verbal agreement with respondent dated January 1, 1998, for the supply of construction materials.
Jose Chie Ubas, operations manager of Ubas Construction, Inc., corroborated deliveries of materials to the project site and respondent’s issuance of checks for payment.
Francisco Barrelo, former Far East Bank employee, testified the checks were dishonored due to the stop payment order.

The checks were issued by Unimasters Conglomeration, Inc. (Unimasters), a corporation with separate juridical personality.
Respondent was not a party to any contract with petitioner.
The checks were intended for replenishing the revolving fund managed by Engineer Ereberto Merelos, project engineer for Unimasters.
Engr. Merelos allegedly lost the checks in January 1998, prompting respondent to issue a Stop Payment Order on April 10, 1998.

Belma Murillo, comptroller of Unimasters, confirmed the corporate nature of the checks and absence of any delivery receipts from petitioner.
Respondent admitted signing the subject checks but denied issuing them to petitioner.
Respondent asserted no written contracts or purchase orders existed with petitioner, who was not a supplier to the project.

The RTC ruled in favor of petitioner, holding respondent personally liable for the amount owed.
It noted the demand letter specifying check details was undisputed and that the assertion that the checks were lost was not credible.
The RTC applied the presumption under Section 24 of the Negotiable Instruments Law (NIL) that the instrument was issued for a valuable consideration and ordered payment of P1,500,000.00 plus interest, litigation expenses, attorney’s fees, and costs.
Respondent’s motion for reconsideration was denied.

The CA reversed the RTC, dismissing the complaint for lack of cause of action.
It held respondent was not the proper party defendant because the checks were those of Unimasters, which has separate juridical personality.
The checks could only prove transactions between petitioner and Unimasters, which was not impleaded.
The CA found petitioner did not present documentary proof such as delivery receipts to substantiate the claim.
The doctrine of piercing the corporate veil was rejected as raised for the first time on appeal without supporting evidence.

The sole issue was whether the CA erred in dismissing the complaint for lack of cause of action.

Whether the Court of Appeals erred in dismissing petitioner’s complaint for lack of cause of action based on petitioner’s failure to establish personal obligation of respondent Wilson Chan for the indebtedness evidenced by the disputed checks.