G.R. No. 212050 & G.R. No. 212216, January 15, 2020
QUINTIN ARTACHO LLORENTE, PETITIONER, V. STAR CITY PTY LIMITED, REPRESENTED BY THE JIMENO AND COPE LAW OFFICES AS ATTORNEY-IN-FACT, RESPONDENT. [G.R. No. 212216] STAR CITY PTY LIMITED, REPRESENTED BY THE JIMENO COPE & DAVID LAW OFFICES AS ITS ATTORNEY-IN-FACT, PETITIONER, V. QUINTIN ARTACHO LLORENTE AND EQUITABLE PCI BANK (NOW BDO UNIBANK, INC.), RESPONDENTS.

FACTS

Star City Pty Limited (SCPL), an Australian corporation operating the Star City Casino in Sydney, filed a complaint for collection of sum of money against Quintin Artacho Llorente, a casino patron, and Equitable PCI Bank (EPCIB). SCPL alleged that on July 12, 2000, Llorente negotiated two EPCIB bank drafts worth US$150,000 each (total US$300,000) to fund his Patron Account for gambling under the casino’s Premium Programme. After EPCIB confirmed the drafts were drawn on clear funds, SCPL credited Llorente’s account. SCPL deposited the drafts on July 18, 2000, but on August 1, 2000, received advice of a “Stop Payment Order” from Llorente. Demands for payment were refused. The Regional Trial Court (RTC) granted a writ of preliminary attachment against Llorente and later held both Llorente and EPCIB solidarily liable for the value of the drafts. Llorente defended by alleging fraud and unfair gaming practices by SCPL and contested SCPL’s legal capacity to sue in Philippine courts. EPCIB denied liability, citing lack of privity and that it merely complied with Llorente’s stop payment order, having already reimbursed him the face value under a Quitclaim, Indemnity and Confidentiality Agreement. The Court of Appeals (CA) affirmed the RTC with modification, absolving EPCIB from liability, finding that SCPL had legal capacity to sue under the isolated transaction rule and was a holder in due course of the drafts. Both Llorente and SCPL filed petitions for review.

ISSUE

The primary issues were: (1) Whether SCPL, a foreign corporation, has legal capacity to sue in Philippine courts under the isolated transaction rule; (2) Whether SCPL is a holder in due course of the bank drafts; and (3) Whether EPCIB is solidarily liable with Llorente for the value of the drafts.

RULING

The Supreme Court denied both petitions and affirmed the CA Decision. It held:
1. SCPL has legal capacity to sue. The “isolated transaction” rule allows a foreign corporation not doing business in the Philippines to sue in Philippine courts upon a single transaction. The transaction involved bank drafts drawn by a Philippine bank (EPCIB), and a suit on such an instrument can be filed where it is drawn, issued, delivered, or dishonored—here, the Philippines (where drawn) or Australia (where dishonored). SCPL sufficiently pleaded it was suing upon an isolated transaction.
2. SCPL is a holder in due course. A holder in due course requires taking the instrument for value, in good faith, and without notice of any infirmity. SCPL gave value by crediting Llorente’s gambling account upon confirmation of the drafts. Llorente’s claim of fraud (e.g., no face cards in seven consecutive Baccarat deals) was insufficient to prove SCPL’s bad faith, especially given his continued play. SCPL took the drafts without notice of the stop payment order.
3. EPCIB is not solidarily liable. The CA correctly absolved EPCIB. As the drawer of a draft, EPCIB’s liability is secondary and accrues only upon dishonor and proper notice. Here, SCPL did not prove it gave EPCIB the requisite notice of dishonor. Furthermore, EPCIB had already reimbursed Llorente the face value of the drafts under an Indemnity Agreement. Holding EPCIB liable would unjustly enrich Llorente, who would receive double recovery. Thus, only Llorente, as the indorser who warranted payment, is liable to SCPL for the US$300,000.