Monday, February 20, 2012

Stelco Mktg. v. CA (June 17, 1992)

Facts: Petitioner Stelco Marketing Corp (Stelco) is engaged in the distribution and sale to the public of structural steel bars. It sold on 7 occasions quantities of steel bars and rolls of G.I sheets with an aggregate amount of P126,859.61 to RYL Construction, Inc. (RYL). Despite the parties’ agreement that payment would be on COD basis, RYL never paid upon delivery of the materials and despite insistent demands.

One year later, RYL issued a check drawn against Metrobank to Armstrong Industries, the sister company and manufacturing arm of Stelco, to the amount of its obligations to the latter. The check however was a company check of another corporation Steelweld Corporation of the Philippines (Steelweld) signed by its President and Vice President. Said check was issued by the president of Steelweld at the request of the president of RYL as an accommodation and “only as guaranty but not to pay for anything.” Armstrong subsequently deposited the check but was dishonoured because it was DAIF*. It bore the endorsements of RYL and Armstrong. The latter filed a complaint against the pres and vp of Steelweld for violation of BP22. The trial court acquitted the defendants noting that the checks were not issued to apply on account for value, it being merely for accommodation purposes. However, the court did not release Steelweld from its liabilities, relying on Sec 29 of the NIL for issuing a check for accommodation.

Relying on the previous decision and averring that it was a holder in due course, Stelco subsequently filed a complaint for recovery of the value of the materials from RYL and Steelweld. However, RYL had already been dissolved leading the trial court to rule against Steelweld and hold them liable. Steelweld appealed to the CA which reversed the decision of the RTC declaring that STELCO was not a holder in due course and Steelweld was a stranger to the contract between STELCO and RYL. 

Issue: Whether or not STELCO was a holder in due course

Held: STELCO’s reliance on the RTC’s decision in the previous criminal case is misplaced. Although the RTC maintained that Steelweld was liable for issuing a check for accommodation, the RTC did not specify to whom it was liable. Despite the records showing that STELCO was in possession of the check, such possession does not give a presumption that the holder is one for value. There was no evidence that STELCO had possession before the checks were presented and dishonoured nor evidence that the checks were given to STELCO, indorsed to STELCO in any manner or form of payment. Only after said checks were dishonoured were they acquired by STELCO.

STELCO never became a holder for value since nowhere in the check was STELCO identified as payee, indorsee, or depositor. Evidence shows that Armstrong was the intended payee, that it was the injured party, and the proper party to bring the action.

Digg Google Bookmarks reddit Mixx StumbleUpon Technorati Yahoo! Buzz DesignFloat Delicious BlinkList Furl

0 comments: on "Stelco Mktg. v. CA (June 17, 1992)"

Post a Comment