G.R. No. 123031 October 12, 1999
CEBU INTERNATIONAL FINANCE CORPORATION, petitioner, vs. COURT OF APPEALS, VICENTE ALEGRE, respondents.

FACTS

Petitioner Cebu International Finance Corporation (CIFC), a quasi-banking institution, issued BPI Check No. 513397 for P514,390.94 in favor of private respondent Vicente Alegre as proceeds of his matured money market investment. The check was drawn against CIFC’s account with Bank of the Philippine Islands (BPI). When Alegre’s wife deposited the check with RCBC, BPI dishonored it with the annotation “Check (is) Subject of an Investigation,” as BPI was investigating several counterfeit checks drawn against CIFC’s account. BPI retained the original check. Alegre demanded payment from CIFC, which refused and instructed him to wait for its bank reconciliation. CIFC later promised to replace the check on the condition that the original be surrendered first—an impossible condition since BPI held it. Alegre filed a complaint for sum of money. Separately, CIFC filed a collection suit against BPI for unlawfully deducting counterfeit checks from its account, which included a prayer to collect the amount of the check paid to Alegre. CIFC also filed a third-party complaint against BPI in Alegre’s case, which the trial court dismissed due to pendency of the other action. BPI and CIFC later entered into a Compromise Agreement wherein BPI credited CIFC’s account with the amount of its claim and, in turn, debited P514,390.94 from that account representing payment/discharge of the check payable to Alegre. The agreement stipulated that if CIFC was held liable to Alegre, it could not go after BPI but could set up the defense of payment. BPI also filed a separate collection suit against Alegre, alleging forgery. The trial court ruled in favor of Alegre, ordering CIFC to pay the principal sum with legal interest. The Court of Appeals affirmed.

ISSUE

1. Whether Article 1249 of the Civil Code applies in the present case.
2. Whether BPI Check No. 513397 was validly discharged.
3. Whether the dismissal of the third-party complaint of petitioner against BPI by reason of lis pendens was proper.

RULING

1. No, Article 1249 of the Civil Code does not apply. The applicable law is the Negotiable Instruments Law (NIL). The transaction involved a check, a negotiable instrument, governed specifically by the NIL. The Court of Appeals erred in applying Article 1249(2) of the Civil Code, which pertains to payment of debts in money other than that stipulated, as the check itself represented the obligation.
2. No, the check was not validly discharged. Petitioner’s liability as drawer was not extinguished. Under the NIL, the drawer’s obligation is secondary, arising only upon dishonor by the drawee bank and notice of dishonor to the drawer. BPI’s dishonor of the check for being “Subject of an Investigation” was valid, and notice was given to Alegre, who then demanded payment from CIFC. The drawer (CIFC) thus became liable. The subsequent debit of funds from CIFC’s account by BPI pursuant to their Compromise Agreement did not constitute payment to the holder (Alegre), as the proceeds and the check remained in BPI’s custody. Payment must be made to the creditor or his authorized agent. Alegre never received the value. Petitioner’s arguments that BPI’s retention of the check constituted “acceptance” under Section 137 of the NIL and that the debit discharged its liability are untenable. Acceptance must be intentional; BPI’s act was due to a forgery investigation. The debit was merely an internal accounting entry between CIFC and BPI, not payment to the holder.
3. Yes, the dismissal of the third-party complaint was proper. The trial court correctly dismissed it on the ground of litis pendentia (lis pendens). The third-party complaint sought contribution and indemnity from BPI for any liability to Alegre. This claim was substantially identical to the ancillary claim in the separate collection suit CIFC had already filed against BPI (Civil Case No. 92-1940). The requisites of litis pendentia were present: identity of parties, rights asserted, and reliefs sought.
The petition was DENIED. The Decision of the Court of Appeals was AFFIRMED.