GR 156262; (July, 2005) (Digest)
G.R. No. 156262. July 14, 2005.
MARIA TUAZON, et al., Petitioners, vs. HEIRS OF BARTOLOME RAMOS, Respondents.
FACTS
Respondents, heirs of Bartolome Ramos, filed a complaint for sum of money and damages against petitioners, led by spouses Leonilo and Maria Tuazon. They alleged that the Tuazon spouses purchased rice from Ramos, leaving an unpaid balance. In payment, Maria Tuazon indorsed and delivered several Traders Royal Bank checks issued by a third person, Evangeline Santos. All checks were dishonored for insufficiency of funds. Respondents further alleged that the Tuazons executed simulated sales of their properties to co-petitioners (their children and the spouses Buenaventura) to defraud creditors.
Petitioners denied being the buyers, claiming Maria Tuazon was merely an agent of Ramos and that Evangeline Santos was the actual purchaser. They insisted Santos was an indispensable party who should have been impleaded, as the checks were drawn in her name, and moved to file a third-party complaint against her, which the trial court denied.
ISSUE
Whether the Court of Appeals erred in affirming the trial court’s judgment holding petitioners civilly liable, despite the non-inclusion of the check drawer, Evangeline Santos, as a party to the case.
RULING
The Supreme Court denied the petition and affirmed the lower courts’ decisions. The core legal principle is that an indorser of a negotiable instrument becomes liable to subsequent holders if the instrument is dishonored. By indorsing the checks issued by Santos and delivering them to Ramos, Maria Tuazon assumed the liability of an indorser under the Negotiable Instruments Law. Consequently, upon the checks’ dishonor, she became directly liable to Ramos (and subsequently to his heirs) for the amounts stated therein.
The suit was correctly directed against the indorser-debtor (Tuazon) and not the drawer (Santos). Santos was not an indispensable party under the Rules of Court, as complete relief could be accorded between the existing parties without her presence. The petitioners’ obligation to pay respondents arose from their own act of indorsement and the underlying rice transaction, which the courts found to be a direct sale, not an agency. The claim of agency was unsubstantiated by evidence. Therefore, the drawer’s absence did not preclude the enforcement of the indorser’s liability. The simulated conveyances of properties were also correctly nullified as fraudulent acts intended to evade the payment of the valid debt.