G.R. No. 190432. April 25, 2017.
ASIA BREWERY, INC. and CHARLIE S. GO, Petitioners, vs. EQUITABLE PCI BANK (now BANCO DE ORO-EPCI, INC.), Respondent.

FACTS

Petitioners Asia Brewery, Inc. (ABI) and its assistant vice president, Charlie S. Go, filed a Complaint for payment against respondent Equitable PCI Bank. They alleged that from 1996 to 1998, ten checks and sixteen demand drafts payable to Go, with a total value of ₱3,785,257.38, were fraudulently acquired by ABI’s sales accounting manager, Raymond U. Keh. Keh impersonated Go, opened accounts in Go’s name at the respondent bank, deposited the instruments, and withdrew the proceeds. The instruments bore the respondent bank’s guarantee of prior endorsements. Petitioners demanded reimbursement from the bank, citing the doctrine in Associated Bank v. CA that a bank collecting on a forged endorsement is liable for money had and received.
In its Answer, respondent raised the affirmative defense of lack of cause of action. It argued that the Complaint itself admitted the instruments were never delivered to the payee, Go. Consequently, Go never became a holder or owner of the instruments and acquired no rights thereon. Respondent contended that any cause of action lay only against the drawers of the checks or the purchasers of the drafts, not against it as a collecting bank, analogizing the situation to payment to a wrong party.

ISSUE

Whether the Regional Trial Court correctly dismissed the Complaint for lack of cause of action.

RULING

Yes, the Supreme Court affirmed the dismissal. A cause of action exists only if the plaintiff’s allegations establish a legal right of the plaintiff and a correlative legal obligation of the defendant, the violation of which would entitle the plaintiff to relief. The Court applied the principle from Development Bank of Rizal v. Sima Wei that the payee of a negotiable instrument acquires no interest therein until its delivery. Delivery is essential to give effect to the instrument and to transfer any rights to the payee.
The petitioners’ own Complaint explicitly stated that none of the instruments reached the payee, Charlie S. Go. This factual admission was fatal. Since there was no delivery to Go, he never became a holder or owner of the checks and drafts. He therefore acquired no right or interest in them that could be violated by the respondent bank’s subsequent actions. Without such a right, Go had no cause of action against the bank. Any claim for the value of the undelivered instruments properly pertained to the drawers or purchasers who suffered the loss, not to the intended payee who never received them. The Court distinguished Associated Bank, as that case involved instruments that had been delivered to the payee, creating rights that were subsequently violated by forgery. Here, the absence of initial delivery precluded the accrual of any right in favor of Go from the outset.