G.R. No. 190432 - Asia Brewery, Inc. vs. Equitable PCI Bank

Case Summary (G.R. No. 190432)

Factual Background

Asia Brewery, Inc. alleged that between September 1996 and July 1998 ten checks and sixteen demand drafts in the name of Charlie S. Go, with an aggregate value of P3,785,257.38, bore the annotation “endorsed by PCI Bank, Ayala Branch, All Prior Endorsement And/Or Lack of Endorsement Guaranteed.” Petitioners alleged that none of those instruments reached the payee Charlie S. Go. They further alleged that a company employee, Raymond U. Keh, impersonated Go, opened accounts at Equitable PCI Bank, deposited the instruments there, and withdrew the proceeds. Raymond Keh was allegedly convicted of theft but absconded before collection of restitution.

Trial Court Proceedings

Equitable PCI Bank filed an Answer with counterclaims and pleaded affirmative defenses that included lack of cause of action. After exchange of pleadings and briefing of the affirmative defenses, the Regional Trial Court dismissed the Complaint for lack of cause of action and denied respondent’s counterclaims. The trial court relied on Development Bank of Rizal v. Sima Wei to conclude that, because the instruments were not delivered to the payee, petitioners had no cause of action against the bank. The court also found that the bank had exercised due diligence in ascertaining identity and distinguished the case from Associated Bank v. CA.

The Parties’ Contentions

Petitioners contended that the Complaint stated a cause of action on its face and that the alleged nondelivery did not defeat the claim because delivery may be actual or constructive and Section 16 of the Negotiable Instruments Law presumes delivery in certain circumstances. Petitioners argued that the bank’s stamped guarantee of prior endorsements or lack thereof estopped it from raising nondelivery. They further asserted that lack of delivery is a defense personal to drawers and that respondent failed to present any evidence in support of its affirmative defense. Equitable PCI Bank maintained that nondelivery meant Go never acquired title or holder status and that liability, if any, lay against drawers and purchasers, not the collecting bank, citing Development Bank of Rizal v. Sima Wei and arguing analogy to payment to a wrong party.

Issues Presented

The principal issue before the Court was whether the RTC erred in dismissing the Complaint for lack of cause of action prior to trial. Subsidiary issues were whether petitioners’ allegations, taken as true for purposes of a motion to dismiss, established a cause of action; whether the presumption of delivery under Section 16 of the Negotiable Instruments Law applied; and whether the bank’s affirmative defenses could be resolved without trial.

Supreme Court’s Ruling

The Court granted the petition. It held that the RTC committed a grave procedural error in dismissing the Complaint for lack of cause of action before the presentation and examination of evidence. The Orders dated January 30, 2008 and November 23, 2009 were reversed and set aside. The Complaint was reinstated and the case was remanded to the RTC of Makati City for further proceedings.

Legal Basis and Reasoning

The Court distinguished failure to state a cause of action from lack of cause of action. It explained that dismissal for failure to state a cause of action is a Rule 16 motion decided on the four corners of the complaint before responsive pleading, whereas dismissal for lack of cause of action is tantamount to a demurrer to evidence under Rule 33, Section 1, which can be raised only after the plaintiff has presented evidence. The Court relied on its precedents, including Bank of America NT&SA v. CA, Pamaran v. Bank of Commerce, and PNB v. Spouses Rivera, to emphasize that factual questions and affirmative defenses that negate a cause of action must be resolved after examination of evidence at trial. The Court underscored that the RTC had not authenticated or examined the submitted documents and had erred in applying Development Bank of Rizal v. Sima Wei as dispositive without first establishing the factual record. The Court further noted that Section 16 of the Negotiable Instruments Law creates presumptions of delivery that a defendant must rebut with evidence; therefore the question whether delivery in the legal sense occurred was a matter for trial and not for resolution on pleadings alone. The Court also observed that allegations in the complaint, including

Case Syllabus (G.R. No. 190432)

Parties and Procedural Posture

Asia Brewery, Inc. is a Philippine corporation and Charlie S. Go was its assistant vice president for finance and co-plaintiff in the Complaint.
Equitable PCI Bank (now Banco de Oro-EPCI, Inc.) is the banking respondent and was sued for payment, reimbursement, or restitution.
Petitioners filed a Complaint on 23 March 2004 before the Regional Trial Court of Makati in Civil Case No. 04-336.
Respondent filed an Answer with Counterclaims on 7 May 2004 and raised, among others, the affirmative defense of lack of cause of action.
The RTC dismissed the Complaint for lack of cause of action by Order dated 30 January 2008 and denied petitioners' motion for reconsideration by Order dated 23 November 2009.
Petitioners filed a petition for review under Rule 45 with the Supreme Court challenging the RTC orders and seeking reinstatement of the Complaint.
Respondent did not appeal the RTC dismissal and the RTC also denied respondent's counterclaims without trial.

Key Factual Allegations

Petitioners alleged that between September 1996 and July 1998 ten checks and sixteen demand drafts were issued in the name of Charlie S. Go with a total value of P3,785,257.38.
The instruments bore the annotation "endorsed by PCI Bank, Ayala Branch, All Prior Endorsement And/Or Lack of Endorsement Guaranteed."
All demand drafts except those issued by the Lucena City and Ozamis branches of Allied Bank were crossed.
Petitioners alleged that none of the instruments reached Charlie S. Go and that a certain Raymond U. Keh, then Sales Accounting Manager of Asia Brewery, Inc., falsely opened bank accounts in Go's name, deposited the instruments, and withdrew the proceeds.
Petitioners alleged that Raymond Keh was charged and convicted of theft and ordered to pay the value of the checks but absconded before collection could be effected.
Petitioners alleged that they demanded payment from respondent and relied on Associated Bank v. CA for the proposition that a collecting bank that obtains proceeds on checks bearing forged or unauthorized endorsements may be liable in moneys had and received.

Procedural Timeline and Court Below

After pleadings and scheduled hearings on affirmative defenses, the RTC considered the matter submitted without reaching pretrial or trial.
The RTC treated the nondelivery and lack-of-delivery doctrines as dispositive and dismissed the Complaint without requiring presentation of evidence.
Petitioners filed a motion for reconsideration which the RTC denied before the Supreme Court review.

Issues Presented

Whether the RTC erred in dismissing the Complaint for lack of cause of action prior to trial.
Whether the Complaint, on its face and accepting its allegations as true, stated a cause of action against respondent.
Whether the alleged nondelivery of instruments to the payee defeated petitioners' cause of action as a matter of law.
Whether Section 16 of the Negotiable Instruments Law and the presumption of delivery applied to petitioners' allegations.
Whether respondent's annotatio