2. ASIA BREWERY VS.

EQUITABLE PCI BANK legal right of the plaintiff; 2) the correlative obligation of the defendant not
to violate the right; and 3) the act or omission of the defendant in violation
G.R. No. 190432. April 25, 2017.* of that legal right.
PETITION for review on certiorari of the orders of the Regional Trial Court
ASIA BREWERY, INC. and CHARLIE S. GO, of Makati City, Br. 139.
petitioners, vs. EQUITABLE PCI BANK (now BANCO DE ORO-EPCI, The facts are stated in the opinion of the Court.
INC.) respondent. Eduardo G. Montenegro for petitioners.
BDO Unibank, Inc. Legal Services Group for respondent.
Remedial Law; Civil Procedure; Failure to State Cause of Action; Lack of
Cause of Action; Failure to state a cause of action is not the same as lack of cause of SERENO, CJ.:
action; the terms are not interchangeable.—Failure to state a cause of action is not
the same as lack of cause of action; the terms are not interchangeable. It may be
This is a petition for review1 under Rule 45 assailing the Orders2 of the
observed that lack of cause of action is not among the grounds that may be raised
Regional Trial Court (RTC) of Makati City in Civil Case No. 04-336. The
in a motion to dismiss under Rule 16 of the Rules of Court. The dismissal of a
Complaint for lack of cause of action is based on Section 1 of Rule 33, which RTC ordered the dismissal of petitioners’ Complaint for lack of cause of
provides: Section 1. Demurrer to evidence.—After the plaintiff has completed the action and denied their motion for reconsideration.
presentation of his evidence, the defendant may move for dismissal on the ground Petitioner Asia Brewery, Inc. (ABI) is a corporation organized and
that upon the facts and the law the plaintiff has shown no right to relief. If his existing under the laws of the Philippines, while petitioner Charlie S. Go
motion is denied he shall have the right to present evidence. If the motion is (Go) was, at the time of the filing of this Petition, its assistant vice
granted but on appeal the order of dismissal is reversed he shall be deemed to have president for finance.3 Respondent is a banking institution also organized
waived the right to present evidence. (Emphasis supplied) If the Complaint fails and existing under the laws of the Philippines.4
to state a cause of action, a motion to dismiss must be made before a responsive
On 23 March 2004, petitioners filed a Complaint5 for payment,
pleading is filed; and the issue can be resolved only on the basis of the allegations
reimbursement, or restitution against respondent be-
in the initiatory pleading. On the other hand, if the Complaint lacks a cause of
_______________
action, the motion to dismiss must be filed after the plaintiff has rested its case.
Same; Same; Same; The test to determine whether a complaint states a cause
1 Mistakenly labeled “Petition for Certiorari”; Rollo, pp. 9-43.
of action against the defendants is this: admitting hypothetically the truth of the 2 Order dated 30 January 2008 issued by Judge Benjamin T. Pozon as presiding judge
allegations of fact made in the complaint, may a judge validly grant the relief of Branch 139 of the RTC-Makati, id., at pp. 168-171; and Order dated 23 November 2009
demanded in the complaint?—The test to determine whether a complaint states a issued by Judge Winlove Dumayas as presiding judge of Branch 59 of the RTC-Makati, id., at
cause of action against the defendants is this: admitting hypothetically the truth of p. 217.
the allegations of fact made in the complaint, may a judge validly grant the relief 3 Id., at pp. 10-11.
demanded in the complaint? We believe that petitioner met this test. A cause of 4 Id., at p. 10.
action has three elements: 1) the 5 Id., at pp. 44-51.

_______________

* FIRST DIVISION. 138

138 SUPREME COURT REPORTS ANNOTATED
Asia Brewery, Inc. vs. Equitable PCI Bank (now Banco de Oro-EPCI,
137 Inc.)
VOL. 824, APRIL 25, 2017 137 fore the RTC. On 7 May 2004, the latter filed its Answer (with
Asia Brewery, Inc. vs. Equitable PCI Bank (now Banco de Oro-EPCI, Counterclaims),6 in which it also raised the special and/or affirmative
defense of lack of cause of action, among others.
Inc.)
Records show that after an exchange of pleadings between the
parties,7 the RTC issued the assailed Orders without proceeding to trial. It
dismissed the Complaint for lack of cause of action, and also denied
Page 1 of 6
respondent’s counterclaims. Respondent did not appeal from that ruling.
Only petitioners moved for reconsideration, but their motion was likewise Raymond Keh was allegedly charged with and convicted of theft and
denied. ordered to pay the value of the checks, but not a single centavo was
collected, because he jumped bail and left the country while the cases were
Antecedent Facts still being tried.12
In demanding payment from respondent, petitioners relied
The antecedent facts, as alleged by petitioners, are as follows: on Associated Bank v. CA,13 in which this Court held “the possession of
Within the period of September 1996 to July 1998, 10 checks and 16 check on a forged or unauthorized indorsement is wrongful, and when the
demand drafts (collectively, “instruments”) were issued in the name of money is collected on the check, the bank can be held for moneys had and
Charlie Go.8 The instruments, with a total value of P3,785,257.38, bore the received.”14
annotation “endorsed by PCI Bank, Ayala Branch, All Prior Endorsement In its Answer, respondent interpreted paragraphs 10 and 11 of the
_______________ Complaint as an admission that the instruments
_______________
6 Id., at pp. 97-120.
7 On 18 May 2004, petitioners filed their Answer to Counterclaims (seeRecords, pp. 103- 9 Id.
105). On 25 May 2004, the RTC issued a Notice setting the affirmative defenses for hearing 10 Id.
(see Records, p. 106). On the date of the scheduled hearing, counsel for petitioner was given 11 Id., at p. 47.
15 days to file a Comment/Opposition to the affirmative defenses, and counsel for respondent 12 Id., at pp. 47-48.
was likewise given the same period from receipt to file a Reply; thereafter the matter will be 13 284 Phil. 615; 208 SCRA 465 (1992).
considered submitted for resolution (see Minutes of the session held on 25 June 2004, Records, 14 Rollo, p. 48.
p. 107; Order dated 25 June 2004, p. 108). Hence on 8 July 2004, petitioners filed their
Comment/Opposition (see Records, pp. 109-118). Respondent then filed a Reply, to which
petitioners filed a Rejoinder dated 4 August 2004 (seeRecords, pp. 119-129, 132-140).
8 Id., at p. 11.
140
140 SUPREME COURT REPORTS ANNOTATED
Asia Brewery, Inc. vs. Equitable PCI Bank (now Banco de Oro-EPCI,
139
Inc.)
VOL. 824, APRIL 25, 2017 139
had not been delivered to the payee, petitioner Go. 15 It argued that the
Asia Brewery, Inc. vs. Equitable PCI Bank (now Banco de Oro-EPCI, Complaint failed to state a cause of action and that petitioners had no
Inc.) cause of action against it, because 1) the Complaint failed to indicate that
And/Or Lack of Endorsement Guaranteed.”9 All the demand drafts, except ABI was a party to any of the instruments;16and 2) Go never became the
those issued by the Lucena City and Ozamis branches of Allied Bank, were holder or owner of the instruments due to nondelivery and, hence, did not
crossed.10 acquire any right or interest.17Respondent also opined that the claims were
In their Complaint, petitioners narrate: only enforceable against the drawers of the checks and the purchasers of
10. None of the above checks and demand drafts set out under the First, Second, the demand drafts, and not against it as a mere “presentor bank,” because
Third, Fourth, Fifth and Sixth Causes of Action reached payee, co-plaintiff the nondelivery to Go was analogous to payment to a wrong party. 18
Charlie S. Go. Respondent argued that Development Bank of Rizal v. Sima Wei19 was
11. All of the above checks and demand drafts fell into the hands of a certain
squarely applicable to the case and cited these portions of the Decision
Raymond U. Keh, then a Sales Accounting Manager of plaintiff Asia Brewery,
therein:20
Inc., who falsely, willfully, and maliciously pretending to be the payee, co-
Thus, the payee of a negotiable instrument acquires no interest with respect
plaintiff Charlie S. Go, succeeded in opening accounts with defendant Equitable
thereto until its delivery to him. Delivery of an instrument means transfer of
PCI Bank in the name of Charlie Go and thereafter deposited the said checks
possession, actual or constructive, from one person to another. Without the initial
and demand drafts in said accounts and withdrew the proceeds thereof to the
delivery of the instrument from the drawer to the payee, there can be no liability
damage and prejudice of plaintiff Asia Brewery, Inc. 11

on the instrument. Moreover, such delivery must be intended to give effect to the
instrument.
Page 2 of 6
 The allegations of the petitioner in the original complaint show that the two (2) _______________
China Bank checks. numbered 384934 and 384935, were not delivered to the payee,
the petitioner herein. Without the delivery of said checks to petitioner-payee, the 21 Rollo, p. 168.
former did not acquire any right or interest therein and cannot therefore assert any 22 Id., at p. 170.
cause of action, founded on said checks, whether 23 Associated Bank v. Court of Appeals, supra note 13.
24 Rollo, pp. 170-171.
_______________

15 Id., at p. 102.
16 Id., at p. 100. 142
17 Id., at p. 103. 142 SUPREME COURT REPORTS ANNOTATED
18 Id., at pp. 104-109.
19 G.R. No. 85419, 9 March 1993, 219 SCRA 736. Asia Brewery, Inc. vs. Equitable PCI Bank (now Banco de Oro-EPCI,
20 Id., at pp. 740-742. Inc.)
Issues

141 Petitioners argue that the trial court seriously erred in dismissing their
VOL. 824, APRIL 25, 2017 141 Complaint for lack of cause of action. They maintain that the allegations
were sufficient to establish a cause of action in favor of Go. 25 They insist
Asia Brewery, Inc. vs. Equitable PCI Bank (now Banco de Oro-EPCI,
that the allegation that the instruments were payable to Go was sufficient
Inc.) to establish a cause of action.26 According to them, the fact that the
against the drawer Sima Wei or against the Producers Bank or any of the other instruments never reached the payee did not mean that there was no
respondents.
delivery, because delivery can be either actual or constructive. 27 They point
xxxx
However, insofar as the other respondents are concerned, petitioner Bank has
out that Section 16 of the Negotiable Instruments Law even provides for a
no privity with them. Since petitioner Bank never received the checks on which it presumption of delivery.28 They further argue that the defense of lack of
based its action against said respondents, it never owned them (the checks) nor did delivery is personal to the maker or drawer, and that respondent was
it acquire any interest therein. Thus, anything which the respondents may have neither.29Petitioners emphasize that all the instruments were crossed
done with respect to said checks could not have prejudiced petitioner Bank. It had (except those issued by the Lucena and Ozamis branches of Allied Bank)
no right or interest in the checks which could have been violated by said and bore the annotation by respondent that: “[A]ll prior endorsement
respondents. Petitioner Bank has therefore no cause of action against said and/or lack of endorsement guaranteed.” In this light, the bank was
respondents, in the alternative or otherwise. If at all, it is Sima Wei, the drawer, allegedly estopped from claiming nondelivery.30
who would have a cause of action against her corespondents, if the allegations in
Petitioners observe that there was no other reason given for the
the complaint are found to be true.
dismissal of the case aside from lack of cause of action. They stress that
not a single witness or documentary evidence was presented in support of
The RTC agreed with respondent that Development Bank v. Sima the affirmative defense.31
Wei was applicable.21 It ruled that petitioners could not have any cause of
action against respondent, because the instruments had never been Court’s Ruling
delivered; and that the cause of action pertained to the drawers of the
checks and the purchasers of the demand drafts. 22 As to the propriety of a A reading of the Order dated 30 January 2008 reveals that the RTC
direct suit against respondent, the trial court found that the former dismissed the Complaint for lack of cause of action
exercised diligence in ascertaining the true identity of Charlie Go, although _______________
he later turned out to be an impostor. This was unlike the finding
25 Id., at p. 22.
in Associated Bank v. CA23 where the collecting bank allowed a person who 26 Id., at p. 23.
was clearly not the payee to deposit the checks and withdraw the 27 Id., at p. 25.
amounts.24 28 Id.
Page 3 of 6
 29 Id., at p. 32. Asia Brewery, Inc. vs. Equitable PCI Bank (now Banco de Oro-EPCI,
30 Id., at p. 33.
31 Id., at p. 22. Inc.)
If the Complaint fails to state a cause of action, a motion to dismiss
must be made before a responsive pleading is filed; and the issue can be
resolved only on the basis of the allegations in the initiatory pleading.34 On
143
the other hand, if the Complaint lacks a cause of action, the motion to
VOL. 824, APRIL 25, 2017 143 dismiss must be filed after the plaintiff has rested its case.35
Asia Brewery, Inc. vs. Equitable PCI Bank (now Banco de Oro-EPCI, In the first situation, the veracity of the allegations is immaterial;
Inc.) however, in the second situation, the judge must determine the veracity of
prior to trial. At that time, this Court, in the 2003 case Bank of America the allegations based on the evidence presented.36
NT&SA v. CA,32 had already emphasized that lack or absence of cause of In PNB v. Spouses Rivera,37 this Court upheld the CA ruling that the
action is not a ground for the dismissal of a complaint; and that the issue trial court therein erred in dismissing the Complaint on the ground of lack
may only be raised after questions of fact have been resolved on the basis of cause of action. We said that “dismissal due to lack of cause of action
of stipulations, admissions, or evidence presented. may be raised any time after the questions of fact have been resolved on
In this case, the trial court proceeded to rule in favor of the dismissal the basis of stipulations, admissions, or evidence presented by the
simply because it believed that the facts of another case were “[o]n all fours plaintiff.”38 In the case at bar, the action has not even reached the pretrial
[with] the instant controversy.”33 It was gravely erroneous, and deeply stage.
alarming, for the RTC to have reached such a conclusion without first In Pamaran v. Bank of Commerce,39 petitioners came directly to this
establishing the facts of the case pending before it. It must be noted that Court and raised the issue of whether the trial court had erred in
the documents submitted to it were mere photocopies that had yet to be dismissing its Complaint only upon a motion to dismiss by way of
examined, proven, authenticated, and admitted. affirmative defenses raised in the Answer of the defendant therein. The
We are compelled to correct this glaring and serious error committed Court ruled then:
by the trial court. Accordingly, we grant the petition. Not only did the RTC Olongapo disregard the allegations in the Complaint, it also
Failure to state a cause of action is not the same as lack of cause of failed to consider that the Bankcom’s arguments necessitate the
examination
action; the terms are not interchangeable. It may be observed that lack of
cause of action is not among the grounds that may be raised in a motion to _______________
dismiss under Rule 16 of the Rules of Court. The dismissal of a Complaint
for lack of cause of action is based on Section 1 of Rule 33, which provides: 34 See Pamaran v. Bank of Commerce, G.R. No. 205753, 4 July 2016, 795 SCRA 430.
Section 1. Demurrer to evidence.—After the plaintiff has completed the 35 Id.
36 Id., citing Manila Banking Corporation v. University of Baguio, Inc., 545 Phil. 268,
presentation of his evidence, the defendant may move for dismissal on the ground
275; 516 SCRA 371, 379-380 (2007).
that upon the facts and the law the plaintiff has shown no right to relief. If his 37 G.R. No. 189577, 20 April 2016, 790 SCRA 688.
motion is denied he shall have the right to present evidence. If the motion is 38 Id., citing Macaslang v. Zamora, 664 Phil. 337; 649 SCRA 92 (2011).
granted but on appeal the order of dismissal is reversed he shall be deemed to have 39 Pamaran v. Bank of Commerce, supra.
waived the right to present evidence. (Emphasis supplied)

_______________
145
32 448 Phil. 181; 400 SCRA 156 (2003).
33 Rollo, p. 168. VOL. 824, APRIL 25, 2017 145
Asia Brewery, Inc. vs. Equitable PCI Bank (now Banco de Oro-EPCI,
Inc.)
144 of the evidence that can be done through a full-blown trial. The
determination of whether Rosa has a right over the subject house and of whether
144 SUPREME COURT REPORTS ANNOTATED Bankcom violated this right cannot be addressed in a mere motion to dismiss. Such
Page 4 of 6
determination requires the contravention of the allegations in the Complaint and A cause of action has three elements: 1) the legal right of the plaintiff;
the full adjudication of the merits of the case based on all the evidence adduced by 2) the correlative obligation of the defendant not to violate the right; and
the parties. (Emphasis supplied) 3) the act or omission of the defendant in violation of that legal right. 41 In
the case at bar, petitioners alleged in their Complaint as follows:
In the same manner, the arguments raised by both of the parties to this 1) They have a legal right to be paid for the value of the instruments.
18. In the said case of Associated Bank v. Court of Appeals, it was held that the
case require an examination of evidence. Even a determination of whether
“weight of authority is to the effect that ‘the possession of a check on a forged or
there was “delivery” in the legal sense necessitates a presentation of unauthorized indorsement is wrongful, and when the money is collected on the
evidence. It was erroneous for the RTC to have concluded that there was check, the bank can be held for moneys had and received.’ The proceeds are held
no delivery, just because the checks did not reach the payee. It failed to for the rightful owner of the payment and may be recovered by him. The
consider Section 16 of the Negotiable Instruments Law, which envisions
_______________
instances when instruments may have been delivered to a person other
than the payee. The provision states:
40 See Aquino v. Quiazon, G.R. No. 201248, 11 March 2015, 753 SCRA 98.
Sec. 16. Delivery; when effectual; when presumed.—Every contract on a 41 See supra note 34; Philippine National Bank v. Rivera, supra note 37; Bank of
negotiable instrument is incomplete and revocable until delivery of the instrument America NT&SA v. Court of Appeals, supra note 32, citing San Lorenzo Village Association,
for the purpose of giving effect thereto. As between immediate parties and as Inc. v. Court of Appeals, 351 Phil. 353; 288 SCRA 115 (1998).
regards a remote party other than a holder in due course, the delivery, in
order to be effectual, must be made either by or under the authority of the party
making, drawing, accepting, or indorsing, as the case may be; and, in such case, the
delivery may be shown to have been conditional, or for a special purpose only, and 147
not for the purpose of transferring the property in the instrument. But where the VOL. 824, APRIL 25, 2017 147
instrument is in the hands of a holder in due course, a valid delivery thereof by all
parties prior to him so as to make them liable to him is conclusively presumed. And Asia Brewery, Inc. vs. Equitable PCI Bank (now Banco de Oro-EPCI,
where the instrument is no longer in the possession of a party whose Inc.)
signature appears thereon, a valid and intentional delivery by him is position of the bank taking the check on the forged or unauthorized indorsement is
presumed until the contrary is proved. (Emphasis supplied) the same as if it had taken the check and collected without indorsement at all. The
act of the bank amounts to conversion of the check.” 42

146 2) Respondent has a correlative obligation to pay, having guaranteed

146 SUPREME COURT REPORTS ANNOTATED all prior endorsements.
Asia Brewery, Inc. vs. Equitable PCI Bank (now Banco de Oro-EPCI, 15. All of the commercial checks and demand drafts mentioned in the First,
Second, Third, Fourth, Fifth and Sixth Causes of Action were endorsed by PCI-
Inc.) Bank-Ayala Branch All Prior Endorsement And/Or Lack of Endorsement
Hence, in order to resolve whether the Complaint lacked a cause of Guaranteed. 43

action, respondent must have presented evidence to dispute the

presumption that the signatories validly and intentionally delivered the
instrument. 3) Respondent refused to pay despite demand.
Even assuming that the trial court merely used the wrong terminology, 17. In a letter dated 19 November 2003 which was duly received by defendant
Equitable PCI Bank, Legal Services Division, on December 17, 2003, plaintiff
that it intended to dismiss the Complaint on the ground of failure to
Charlie S. Go, relying on the decision in Associated Bank v. Court of Appeals, 208
state a cause of action, the Complaint would still have to be reinstated. SCRA 465, demanded from defendant Equitable PCI Bank payment,
The test to determine whether a complaint states a cause of action reimbursement or restitution of the value of the commercial checks and demand
against the defendants is this: admitting hypothetically the truth of the drafts mentioned in the First, Second, Third, Fourth, Fifth and Sixth Causes of
allegations of fact made in the complaint, may a judge validly grant the Action. x x x
relief demanded in the complaint?40 xxxx
We believe that petitioner met this test.
Page 5 of 6
19. Instead of acceding to plaintiffs’ valid and justifiable demand, defendant _______________
Equitable PCI Bank refused x x x. 44

46 Id.
47 Supra note 40.
It is of no moment that respondent denies that it has any obligation to 48 Id., citing Insular Investment and Trust Corporation v. Capital One Equities Corp.,
686 Phil. 819; 671 SCRA 112 (2012).
pay. In determining the presence of the elements, the inquiry is confined 49 Id., citing Heirs of Nepomucena Paez v. Torres, 381 Phil. 393, 402; 324 SCRA 403,
to the four corners of the complaint.45 In fact, even if some of the allegations 411-412 (2000).
are in the form
_______________

42 Rollo, p. 48. 149

43 Id. VOL. 824, APRIL 25, 2017 149
44 Id., at pp. 48-49.
45 See Ilano v. Español, 514 Phil. 553; 478 SCRA 365 (2005). Asia Brewery, Inc. vs. Equitable PCI Bank (now Banco de Oro-EPCI,
Inc.)
Notes.—When a motion to dismiss is grounded on the failure to state
148 a cause of action, a ruling thereon should, as a rule, be based only on the
148 SUPREME COURT REPORTS ANNOTATED facts alleged in the complaint. (Philippine National Bank vs. Rivera, 790
SCRA 688 [2016])
Asia Brewery, Inc. vs. Equitable PCI Bank (now Banco de Oro-EPCI, Dismissal due to lack of cause of action may be raised any time after
Inc.) the questions of fact have been resolved on the basis of stipulations,
of conclusions of law, the elements of a cause of action may still be present. 46 admissions or evidence presented by the plaintiff. (Id.)
The Court believes that it need not delve into the issue of whether the
instruments have been delivered, because it is a matter of defense that ——o0o——
would have to be proven during trial on the merits. In Aquino v.
Quiazon,47 we held that if the allegations in a complaint furnish sufficient
basis on which the suit may be maintained, the complaint should not be
dismissed regardless of the defenses that may be raised by the
defendants.48 In other words, “[a]n affirmative defense, raising the ground
that there is no cause of action as against the defendants poses a question
of fact that should be resolved after the conduct of the trial on the merits.”49
WHEREFORE, the petition is GRANTED. The Order dated 30
January 2008 issued by Judge Benjamin T. Pozon and the Order dated 23
November 2009 issued by Judge Winlove Dumayas in Civil Case No. 04-
336 are REVERSED and SET ASIDE. The Complaint is REINSTATED,
and the case is ordered REMANDED to the Regional Trial Court of
Makati City for further proceedings. Let the records of the case be likewise
remanded to the court a quo.
SO ORDERED.
Leonardo-De Castro, Del Castillo, Perlas-Bernabe and Caguioa, JJ.,
concur.

Petition granted, orders dated 30 January 2008 and 23 November 2009

reversed and set aside.

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