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DEVELOPMENT BANK OF RIZAL v. SIMA WEI

FACTS:

The Development Bank of Rizal (petitioner Bank) filed a complaint against Sima Wei and/or Lee Kian Huat, Mary Cheng Uy, Samson Tung, Asian Industrial Plastic Corporation (Plastic Corporation), and the Producers Bank of the Philippines. The complaint sought to enforce payment of the balance on a promissory note and two checks issued in relation to the note. The checks were allegedly issued in full settlement of the note but were not delivered to the petitioner Bank. The trial court granted the defendants' Motions to Dismiss, which was affirmed by the Court of Appeals. The petitioner Bank filed a Petition for Review by Certiorari, arguing that it has a cause of action against the defendants and that a rule on alternative defendants should be applied.

ISSUES:

  1. Whether the petitioner Bank has a cause of action against the defendants.

  2. Whether the rule on alternative defendants is applicable to the case.

RULING:

  1. The Supreme Court held that the petitioner Bank does not have a cause of action against the defendants, except for Sima Wei. A cause of action requires the legal right of the plaintiff, the correlative obligation of the defendant, and an act or omission of the defendant in violation of said legal right. In this case, the two checks were not delivered to the petitioner Bank, rendering it without any right or interest in the checks. Therefore, it cannot assert any cause of action based on the checks. However, if Sima Wei fails to prove that she has been relieved from liability on the promissory note, the petitioner Bank may still have a cause of action against her. As for the other defendants, the petitioner Bank has no privity with them and thus cannot assert a cause of action. The rule on alternative defendants is also deemed irrelevant since the petitioner Bank did not acquire any right or interest in the checks due to lack of delivery. The Court affirmed the dismissal of the complaint in relation to the second cause of action and remanded the case to the trial court for further proceedings on the first cause of action against Sima Wei.

PRINCIPLES:

  • A cause of action requires the legal right of the plaintiff, the correlative obligation of the defendant, and an act or omission of the defendant in violation of said legal right.

  • Delivery of a negotiable instrument, such as a check, is required to evidence its existence as a binding contract.

  • The payee of a negotiable instrument acquires no interest until its delivery to him or her.

  • A party cannot change his or her theory on appeal, as it would deprive the other party of his or her day in court.

  • The rule on alternative defendants is not applicable when the plaintiff did not acquire any right or interest in the subject matter of the action.