G.R. No. 96160 June 17, 1992
STELCO MARKETING CORPORATION, petitioner, vs. HON. COURT OF APPEALS and STEELWELD CORPORATION OF THE PHILIPPINES, INC., respondents.

FACTS

Petitioner Stelco Marketing Corporation sold construction materials to RYL Construction, Inc. on credit, with an aggregate price of P126,859.61. RYL failed to pay. On April 4, 1981, RYL’s president, Romeo Y. Lim, obtained an accommodation check from his friend, Peter Rafael Limson, president of respondent Steelweld Corporation. The check, Metrobank Check No. 765380 for P126,129.86, was a Steelweld company check signed by its officers. Limson issued it only as a guaranty, not for payment. Romeo Lim gave the check to Armstrong Industries, described as Stelco’s “sister corporation,” in payment of an obligation. When deposited, the check was dishonored for insufficient funds. Armstrong Industries filed a criminal case for violation of B.P. 22 against Steelweld’s officers, who were acquitted, but the court noted Steelweld’s potential liability under the Negotiable Instruments Law as an accommodation party. In May 1985, Stelco filed a civil complaint against RYL and Steelweld to recover the value of the materials sold, alleging the check was given to it in payment, endorsed by R.Y. Lim. RYL could not be located. Only Steelweld answered, denying any transaction with Stelco and asserting the check was issued only as accommodation without consideration. The trial court ruled in favor of Stelco, holding Steelweld liable as an accommodation party under Section 29 of the Negotiable Instruments Law. The Court of Appeals reversed, dismissing the complaint against Steelweld and ordering Stelco to pay attorney’s fees, finding no evidence that Stelco was a holder for value of the check and no commercial transaction between Stelco and Steelweld.

ISSUE

Whether Stelco Marketing Corporation is a holder for value of the accommodation check issued by Steelweld Corporation, thereby making Steelweld liable to Stelco under Section 29 of the Negotiable Instruments Law.

RULING

No. The Supreme Court denied the petition and affirmed the Court of Appeals’ decision. Stelco never became a holder in due course or a holder for value of the check. To be a holder in due course, one must take the instrument before it is overdue, in good faith, and for value. The evidence showed Stelco’s possession of the check only occurred after its presentment and dishonor, which is inconsequential. There was no proof the check was ever given or endorsed to Stelco before presentment for payment. The check was payable to cash and negotiated to Armstrong Industries, not Stelco. The Court of Appeals’ factual finding that Stelco never became a holder for value is conclusive. Since Stelco was not a holder for value, Steelweld, as an accommodation party, is not liable to it under Section 29 of the Negotiable Instruments Law. The complaint against Steelweld was correctly dismissed.