G.R. No. 148211, 25 July 2006


Respondent allegedly took out a loan of P409,000 from petitioner. To secure the loan, respondent issued petitioner an Asian Bank Corporation check amount of P325,500. The check was, however, dishonored due to a material alteration when petitioner deposited the check on. Respondent, through her representative, remitted P235,000 to petitioner as partial payment of the loan. However, petitioner filed an action for a sum of money and damages against ABC for the full amount of the dishonored check. When respondent went to ABC Salcedo Village Branch to withdraw money from her account, she was unable to do so because the trial court had ordered ABC to pay petitioner the value of respondent’s ABC check.


Whether ABC Bank can be made liable to the petitioner.


In any event, the RTC decision may be annulled for lack of jurisdiction over the person of respondent. The pertinent provisions of the Negotiable Instruments Law are enlightening:

SEC. 185. Check, defined. – A check is a bill of exchange drawn on a bank payable on demand. Except as herein otherwise provided, the provisions of this Act applicable to a bill of exchange payable on demand apply to a check.

SEC. 189. When check operates as an assignment. – A check of itself does not operate as an assignment of any part of the funds to the credit of the drawer with the bank, and the bank is not liable to the holder, unless and until it accepts or certifies the check.

If a bank refuses to pay a check (notwithstanding the sufficiency of funds), the payee-holder cannot, in view of the cited sections, sue the bank. The payee should instead sue the drawer who might in turn sue the bank. Section 189 is sound law based on logic and established legal principles: no privity of contract exists between the drawee-bank and the payee. Indeed, in this case, there was no such privity of contract between ABC and petitioner.

Petitioner should not have sued ABC. Contracts take effect only between the parties, their assigns and heirs, except in cases where the rights and obligations arising from the contract are not transmissible by their nature, or by stipulation or by provision of law. None of the foregoing exceptions to the relativity of contracts applies in this case.

*Case digest by Meriam Rika R. Wong, JD-IV, Andres Bonifacio Law School, SY 2019-2020