GR 19051; (April, 1923) (Digest)

G.R. No. 19051; April 4, 1923
ASIAN BANKING CORPORATION, plaintiff-appellee, vs. JUAN JAVIER, limited copartnership, defendant-appellant.

FACTS

Salvador B. Chaves drew two checks on the Philippine National Bank (PNB), payable to La Insular. The checks were indorsed by the limited partners of La Insular (the defendant, Juan Javier, limited copartnership). Chaves then deposited these indorsed checks into his current account with the plaintiff, Asian Banking Corporation. After Chaves drew on these funds, the plaintiff bank presented the checks to PNB for payment. PNB dishonored them due to insufficient funds of the drawer, Chaves. The plaintiff bank then filed an action against the defendant as indorser to recover the value of the checks.

ISSUE

Whether the defendant, as indorser, is liable to the plaintiff bank for the value of the dishonored checks.

RULING

No. The Supreme Court reversed the lower court’s judgment and absolved the defendant from liability. Under Section 89 of the Negotiable Instruments Law (Act No. 2031), an indorser is discharged from liability unless notice of dishonor (for non-payment) is given to them within the time and in the manner required by law. The plaintiff, seeking to enforce the defendant’s liability as indorser, had the burden to prove that such notice was given. The record contained no proof that the plaintiff gave any notice of dishonor to the defendant. Consequently, the plaintiff failed to establish its cause of action against the defendant as indorser.