Stelco Marketing v. Ca Digest DKGS

DIAZMEAN KYLA G.
SOTELO
2020
Stelco Marketing Corp. v. CA

Topic: accommodation party
Instrument: BOE – Check, BI
Drawer – Limson (Pres. of Steelweld Corp.) & Torres (VP of Steelweld Corp.)
Words of negotiability – “payable to the order of cash” = bearer
Drawee – Metrobank
RYL Construction Inc. –- Armstrong Industries
Facts:
 STELCO Marketing is engaged in the distribution and sales of structural steel bars.
 On 7 different occasions, STELCO sold to RYL Construction Inc. various quantities of
steel bars of various sizes and rolls of G.I. wires; the aggregate price of which was
126,859.61 pesos.
 The corresponding invoices issued by STELCO stipulated that RYL would pay COD but
no payments were made for the materials thus ordered and delivered despite insistent
demands.
 On April 14, 1981, RYL delivered to Armstrong Industries, which STELCO describes as
its “sister corporation” and “manufacturing arm” a check drawn against Metrobank in the
amount of 126,129.86.
 Said check was a company check if another corporation, Steelweld Corporation of the
Philippines, signed by its Pres, Peter Limson and its VP, Artemio Torres.
 Said check was issued by Limson at the behest of his friend, Romeo Y. Lim, Pres of
RYL. Upon asking for financial assistance, Limson only agreed to give a check by way
of accommodation “only as guaranty but not to pay for anything.”
 When Armstrong Industries deposited the check at its bank, it was dishonored due to
insufficient funds. When so deposited, the check bore 2 indorsements: RYL Construction
– Armstrong Industries
 Armstrong Industries filed a complaint against Limson and Torres for violation of BP 22.
 RTC, Manila: Acquitted on the ground that check in question was not issued by the
drawer to apply on account for value, it being merely for accommodation purposes. The
judgement conditioned the acquittal with: “This is not however to release STEELWELD
Corporation from its liability under Sec. 29 of NIL for having issued it for the
accommodation of Romeo Lim.”
 4 years and 11 months later, STELCO filed with RTC Caloocan a civil complaint against
both RYL and STEELWELD for the recovery of the value of steel bars and write sold
and delivered to RYL.
 RYL could no longer be located and served with summons. Only STEELWELD filed an
answer:
a) STELCO is a complete stranger to it as it had not entered into any transaction or
business dealing of any kind with STELCO; the transactions cited in the complaint
were solely and exclusively between STELCO and RYL.
DIAZMEAN KYLA G. SOTELO
2020
b) The check in question was only given to R. Lim as collateral for another obligation
but in breach of his agreement, R. Lim utilized the check for another purpose and
negotiated it Armstrong.
c) The check is wholly inoperative as it was not issued for any valuable consideration
either to R. Lim or to STELCO.
 RTC, Caloocan: ordered STEELWELD to pay the amount 126,129.86 with legal interest
from May 9, 1985.
 CA: On appeal by STEELWELD, the CA reversed the judgement. Ordered STELCO to
pay 15,000 as atty’s fees and cost of litigation.
Issue: Whether STELCO can hold STEELWELD liable as an accommodation drawer.
Ruling:
 First, the Court answered whether STELCO can be considered a holder in due course
which would give rise to its right to hold STEELWELD liable. The Court ruled in the
negative. STELCO, is not and was never a holder in due course of the check.
 Sec. 52 provides that a holder in due course is one who has taken the instrument under
the conditions set forth and one of which is “that he became the holder of it before it was
overdue and without notice that it has been previously dishonored;” – No evidence of
STELCO’s possession at the time before it was presented by ARMSTRONG and
subsequently dishonored.
 Nowhere in the check itself does the name STELCO Maketing appear as either payee,
indorsee or depositor thereof. No record of any intervention or participation by STELCO
in any manner or form whatsoever in the previous transactions between STEELWELD
and STELCO or between either of them and ARMSTRONG.
 Possession of a negotiable instrument after presentment and dishonor is utterly
inconsequential and does not make the possessor thereof a holder for value within the
meaning of the law. It gives rise to NO LIABILITY on the part of the maker or drawer
and indorses.
 In addition, no evidence of ARMSTRONG attempting to encash the check in behalf of
STELCO as its agent.
 SC: Petition denied. CA’s decision is affirmed: STEELWELD is not liable to STELCO;
Ordered STELCO to pay the costs of litigation.

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DIAZMEAN KYLA G.

Stelco Marketing Corp. v. CA

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