G.R. No. 190432. April 25, 2017.

2017.* 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
ASIA BREWERY, INC. and CHARLIE S. GO, petitioners, vs. EQUITABLE PCI BANK lack of cause of action, and also denied respondent’s counterclaims. Respondent did
(now BANCO DE ORO-EPCI, INC.) respondent. not appeal from that ruling. Only petitioners moved for reconsideration, but their motion
was likewise denied.
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 action; Antecedent Facts
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 observed that The antecedent facts, as alleged by petitioners, are as follows:
lack of cause of action is not among the grounds that may be raised in a motion to Within the period of September 1996 to July 1998, 10 checks and 16 demand drafts
dismiss under Rule 16 of the Rules of Court. The dismissal of a Complaint for lack of (collectively, “instruments”) were issued in the name of Charlie Go.8 The instruments,
cause of action is based on Section 1 of Rule 33, which provides: Section 1. Demurrer with a total value of P3,785,257.38, bore the annotation “endorsed by PCI Bank, Ayala
to evidence.—After the plaintiff has completed the presentation of his evidence, the Branch, All Prior Endorsement And/Or Lack of Endorsement Guaranteed.”9 All the
defendant may move for dismissal on the ground that upon the facts and the law the demand drafts, except those issued by the Lucena City and Ozamis branches of Allied
plaintiff has shown no right to relief. If his motion is denied he shall have the right to Bank, were crossed.10
present evidence. If the motion is granted but on appeal the order of dismissal is In their Complaint, petitioners narrate:
reversed he shall be deemed to have waived the right to present evidence. (Emphasis None of the above checks and demand drafts set out under the First, Second, Third,
supplied) If the Complaint fails to state a cause of action, a motion to dismiss must be Fourth, Fifth and Sixth Causes of Action reached payee, co-plaintiff Charlie S. Go.
made before a responsive pleading is filed; and the issue can be resolved only on the All of the above checks and demand drafts fell into the hands of a certain Raymond
basis of the allegations in the initiatory pleading. On the other hand, if the U. Keh, then a Sales Accounting Manager of plaintiff Asia Brewery, Inc., who
Complaint lacks a cause of action, the motion to dismiss must be filed after the plaintiff falsely, willfully, and maliciously pretending to be the payee, co-plaintiff Charlie S.
has rested its case. Go, succeeded in opening accounts with defendant Equitable PCI Bank in the
Same; Same; Same; The test to determine whether a complaint states a cause name of Charlie Go and thereafter deposited the said checks and demand drafts in
of action against the defendants is this: admitting hypothetically the truth of the said accounts and withdrew the proceeds thereof to the damage and prejudice of
allegations of fact made in the complaint, may a judge validly grant the relief demanded plaintiff Asia Brewery, Inc.11
in the complaint?—The test to determine whether a complaint states a cause of action
against the defendants is this: admitting hypothetically the truth of the allegations of fact Raymond Keh was allegedly charged with and convicted of theft and ordered to
made in the complaint, may a judge validly grant the relief demanded in the complaint? pay the value of the checks, but not a single centavo was collected, because he jumped
We believe that petitioner met this test. A cause of action has three elements: 1) the bail and left the country while the cases were still being tried.12
legal right of the plaintiff; 2) the correlative obligation of the defendant not to violate the In demanding payment from respondent, petitioners relied on Associated Bank v.
right; and 3) the act or omission of the defendant in violation of that legal right. CA,13 in which this Court held “the possession of check on a forged or unauthorized
indorsement is wrongful, and when the money is collected on the check, the bank can
PETITION for review on certiorari of the orders of the Regional Trial Court of Makati
be held for moneys had and received.”14
City, Br. 139.
In its Answer, respondent interpreted paragraphs 10 and 11 of the Complaint as an
The facts are stated in the opinion of the Court.
admission that the instruments had not been delivered to the payee, petitioner Go.15 It
Eduardo G. Montenegro for petitioners.
argued that the Complaint failed to state a cause of action and that petitioners had no
BDO Unibank, Inc. Legal Services Group for respondent.
cause of action against it, because 1) the Complaint failed to indicate that ABI was a
SERENO, CJ.: party to any of the instruments;16and 2) Go never became the holder or owner of the
instruments due to nondelivery and, hence, did not acquire any right or
This is a petition for review1 under Rule 45 assailing the Orders 2 of the Regional interest.17Respondent also opined that the claims were only enforceable against the
Trial Court (RTC) of Makati City in Civil Case No. 04-336. The RTC ordered the drawers of the checks and the purchasers of the demand drafts, and not against it as
dismissal of petitioners’ Complaint for lack of cause of action and denied their motion a mere “presentor bank,” because the nondelivery to Go was analogous to payment to
for reconsideration. a wrong party.18
Petitioner Asia Brewery, Inc. (ABI) is a corporation organized and existing under Respondent argued that Development Bank of Rizal v. Sima Wei19 was squarely
the laws of the Philippines, while petitioner Charlie S. Go (Go) was, at the time of the applicable to the case and cited these portions of the Decision therein: 20
filing of this Petition, its assistant vice president for finance.3 Respondent is a banking Thus, the payee of a negotiable instrument acquires no interest with respect thereto
institution also organized and existing under the laws of the Philippines.4 until its delivery to him. Delivery of an instrument means transfer of possession, actual
On 23 March 2004, petitioners filed a Complaint 5 for payment, reimbursement, or or constructive, from one person to another. Without the initial delivery of the instrument
restitution against respondent before the RTC. On 7 May 2004, the latter filed its from the drawer to the payee, there can be no liability on the instrument. Moreover,
Answer (with Counterclaims),6 in which it also raised the special and/or affirmative such delivery must be intended to give effect to the instrument.
defense of lack of cause of action, among others. 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 former did may only be raised after questions of fact have been resolved on the basis of
not acquire any right or interest therein and cannot therefore assert any cause of stipulations, admissions, or evidence presented.
action, founded on said checks, whether against the drawer Sima Wei or against the In this case, the trial court proceeded to rule in favor of the dismissal simply
Producers Bank or any of the other respondents. because it believed that the facts of another case were “[o]n all fours [with] the instant
controversy.”33 It was gravely erroneous, and deeply alarming, for the RTC to have
xxxx reached such a conclusion without first establishing the facts of the case pending before
However, insofar as the other respondents are concerned, petitioner Bank has no it. It must be noted that the documents submitted to it were mere photocopies that had
privity with them. Since petitioner Bank never received the checks on which it based its yet to be examined, proven, authenticated, and admitted.
action against said respondents, it never owned them (the checks) nor did it acquire We are compelled to correct this glaring and serious error committed by the trial
any interest therein. Thus, anything which the respondents may have done with respect court. Accordingly, we grant the petition.
to said checks could not have prejudiced petitioner Bank. It had no right or interest in Failure to state a cause of action is not the same as lack of cause of action; the
the checks which could have been violated by said respondents. Petitioner Bank has terms are not interchangeable. It may be observed that lack of cause of action is not
therefore no cause of action against said respondents, in the alternative or otherwise. among the grounds that may be raised in a motion to dismiss under Rule 16 of the
If at all, it is Sima Wei, the drawer, who would have a cause of action against her Rules of Court. The dismissal of a Complaint for lack of cause of action is based on
corespondents, if the allegations in the complaint are found to be true. Section 1 of Rule 33, which provides:
Section 1. Demurrer to evidence.—After the plaintiff has completed the presentation
of his evidence, the defendant may move for dismissal on the ground that upon the
The RTC agreed with respondent that Development Bank v. Sima Wei was
facts and the law the plaintiff has shown no right to relief. If his motion is denied he shall
applicable.21 It ruled that petitioners could not have any cause of action against
have the right to present evidence. If the motion is granted but on appeal the order of
respondent, because the instruments had never been delivered; and that the cause of
dismissal is reversed he shall be deemed to have waived the right to present evidence.
action pertained to the drawers of the checks and the purchasers of the demand
(Emphasis supplied) If the Complaint fails to state a cause of action, a motion to
drafts.22 As to the propriety of a direct suit against respondent, the trial court found that
dismiss must be made before a responsive pleading is filed; and the issue can be
the former exercised diligence in ascertaining the true identity of Charlie Go, although
resolved only on the basis of the allegations in the initiatory pleading. 34 On the other
he later turned out to be an impostor. This was unlike the finding in Associated Bank v.
hand, if the Complaint lacks a cause of action, the motion to dismiss must be filed after
CA23 where the collecting bank allowed a person who was clearly not the payee to
the plaintiff has rested its case.35
deposit the checks and withdraw the amounts.24
Issues In the first situation, the veracity of the allegations is immaterial; however, in the
second situation, the judge must determine the veracity of the allegations based on the
Petitioners argue that the trial court seriously erred in dismissing their Complaint evidence presented.36
for lack of cause of action. They maintain that the allegations were sufficient to establish In PNB v. Spouses Rivera,37 this Court upheld the CA ruling that the trial court
a cause of action in favor of Go.25 They insist that the allegation that the instruments therein erred in dismissing the Complaint on the ground of lack of cause of action. We
were payable to Go was sufficient to establish a cause of action.26 According to them, said that “dismissal due to lack of cause of action may be raised any time after the
the fact that the instruments never reached the payee did not mean that there was no questions of fact have been resolved on the basis of stipulations, admissions, or
delivery, because delivery can be either actual or constructive. 27 They point out that evidence presented by the plaintiff.”38 In the case at bar, the action has not even
Section 16 of the Negotiable Instruments Law even provides for a presumption of reached the pretrial stage.
delivery.28 They further argue that the defense of lack of delivery is personal to the In Pamaran v. Bank of Commerce,39 petitioners came directly to this Court and
maker or drawer, and that respondent was neither.29Petitioners emphasize that all the raised the issue of whether the trial court had erred in dismissing its Complaint only
instruments were crossed (except those issued by the Lucena and Ozamis branches upon a motion to dismiss by way of affirmative defenses raised in the Answer of the
of Allied Bank) and bore the annotation by respondent that: “[A]ll prior endorsement defendant therein. The Court ruled then:
and/or lack of endorsement guaranteed.” In this light, the bank was allegedly estopped Not only did the RTC Olongapo disregard the allegations in the Complaint, it also failed
from claiming nondelivery.30 to consider that the Bankcom’s arguments necessitate the examination of the
Petitioners observe that there was no other reason given for the dismissal of the evidence that can be done through a full-blown trial. The determination of whether
case aside from lack of cause of action. They stress that not a single witness or Rosa has a right over the subject house and of whether Bankcom violated this right
documentary evidence was presented in support of the affirmative defense.31 cannot be addressed in a mere motion to dismiss. Such determination requires the
contravention of the allegations in the Complaint and the full adjudication of the merits
Court’s Ruling of the case based on all the evidence adduced by the parties. (Emphasis supplied)

A reading of the Order dated 30 January 2008 reveals that the RTC dismissed the
Complaint for lack of cause of action prior to trial. At that time, this Court, in the 2003 In the same manner, the arguments raised by both of the parties to this case require
case Bank of America NT&SA v. CA,32 had already emphasized that lack or absence an examination of evidence. Even a determination of whether there was “delivery” in
of cause of action is not a ground for the dismissal of a complaint; and that the issue the legal sense necessitates a presentation of evidence. It was erroneous for the RTC
to have concluded that there was no delivery, just because the checks did not reach
the payee. It failed to consider Section 16 of the Negotiable Instruments Law, which demanded from defendant Equitable PCI Bank payment, reimbursement or restitution
envisions instances when instruments may have been delivered to a person other than of the value of the commercial checks and demand drafts mentioned in the First,
the payee. The provision states: Second, Third, Fourth, Fifth and Sixth Causes of Action. x x x
Sec. 16. Delivery; when effectual; when presumed.—Every contract on a negotiable xxxx
instrument is incomplete and revocable until delivery of the instrument for the purpose 19. Instead of acceding to plaintiffs’ valid and justifiable demand, defendant Equitable
of giving effect thereto. As between immediate parties and as regards a remote PCI Bank refused x x x.44
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 It is of no moment that respondent denies that it has any obligation to pay. In
been conditional, or for a special purpose only, and not for the purpose of transferring determining the presence of the elements, the inquiry is confined to the four corners of
the property in the instrument. But where the instrument is in the hands of a holder in the complaint.45 In fact, even if some of the allegations are in the form of conclusions
due course, a valid delivery thereof by all parties prior to him so as to make them liable of law, the elements of a cause of action may still be present. 46
to him is conclusively presumed. And where the instrument is no longer in the The Court believes that it need not delve into the issue of whether the instruments
possession of a party whose signature appears thereon, a valid and intentional have been delivered, because it is a matter of defense that would have to be proven
delivery by him is presumed until the contrary is proved. (Emphasis supplied) 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
Hence, in order to resolve whether the Complaint lacked a cause of action, should not be dismissed regardless of the defenses that may be raised by the
respondent must have presented evidence to dispute the presumption that the defendants.48 In other words, “[a]n affirmative defense, raising the ground that there
signatories validly and intentionally delivered the instrument. is no cause of action as against the defendants poses a question of fact that should be
Even assuming that the trial court merely used the wrong terminology, that it resolved after the conduct of the trial on the merits.”49
intended to dismiss the Complaint on the ground of failure to state a cause of action, WHEREFORE, the petition is GRANTED. The Order dated 30 January 2008 issued
the Complaint would still have to be reinstated. by Judge Benjamin T. Pozon and the Order dated 23 November 2009 issued by Judge
The test to determine whether a complaint states a cause of action against the Winlove Dumayas in Civil Case No. 04-336 are REVERSED and SET ASIDE. The
defendants is this: admitting hypothetically the truth of the allegations of fact made in Complaint is REINSTATED, and the case is ordered REMANDED to the Regional Trial
the complaint, may a judge validly grant the relief demanded in the complaint? 40 Court of Makati City for further proceedings. Let the records of the case be likewise
We believe that petitioner met this test. remanded to the court a quo.
A cause of action has three elements: 1) the legal right of the plaintiff; 2) the SO ORDERED.
correlative obligation of the defendant not to violate the right; and 3) the act or omission Leonardo-De Castro, Del Castillo, Perlas-Bernabe and Caguioa, JJ., concur.
of the defendant in violation of that legal right. 41 In the case at bar, petitioners alleged
in their Complaint as follows: Petition granted, orders dated 30 January 2008 and 23 November 2009 reversed
1) They have a legal right to be paid for the value of the instruments. and set aside.
18. In the said case of Associated Bank v. Court of Appeals, it was held that the
Notes.—When a motion to dismiss is grounded on the failure to state a cause of
“weight of authority is to the effect that ‘the possession of a check on a forged or
action, a ruling thereon should, as a rule, be based only on the facts alleged in the
unauthorized indorsement is wrongful, and when the money is collected on the check,
complaint. (Philippine National Bank vs. Rivera, 790 SCRA 688 [2016])
the bank can be held for moneys had and received.’ The proceeds are held for the
Dismissal due to lack of cause of action may be raised any time after the questions
rightful owner of the payment and may be recovered by him. The position of the bank
of fact have been resolved on the basis of stipulations, admissions or evidence
taking the check on the forged or unauthorized indorsement is the same as if it had
presented by the plaintiff. (Id.)
taken the check and collected without indorsement at all. The act of the bank amounts
to conversion of the check.”42
——o0o——

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

3) Respondent refused to pay despite demand.