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STATE INVESTMENT HOUSE v.

CA and MOULIC
G.R. No. 101163
11 January 1993
FACTS:
- Moulic (drawer) issued to Victoriano (payee) 2 post-dated Equitable Banking
(drawee) checks in the amount of P50,000 each as security for pieces of jewelry
to be sold on commission. Thereafter, Victoriano negotiated the checks to State.
- Moulic failed to sell the pieces of jewelry, so she returned them to the payee
before maturity of the checks. However, such checks could no longer be
retrieved. Consequently, before their maturity dates, Moulic withdrew her funds
from the drawee bank.
- State sued Moulic to recover the value of the checks. Moulic contends that she
incurred no obligation because the jewelry was never sold and the checks were
negotiated without her knowledge and consent. RTC dismissed the complaint
and ordered State to pay Moulic.
- CA affirmed RTC on the ground that the Notice of Dishonor to Moulic was made
beyond the period prescribed by NIL and that even if State did serve such notice
on Moulic within the reglementary period it would be of no consequence as the
checks should never have been presented for payment.
ISSUE relevant to Sec. 119 (Instrument; how discharged):
1. W/N the issuance of the post-dated check as mere security is a ground for
discharge against a holder in due course
HELD:
1. No.
Under paragraph (c) by the intentional cancellation thereof by the holder, the
cancellation is effected by destroying the instrument either by tearing it up,
burning it, or writing the word cancelled on the instrument. The holder must
make the act of destroying intentionally. Since Moulic failed to get back
possession of the checks, the intentional cancellation of such is altogether
impossible.
Under paragraph (d) by any other act which will discharge a simple contract for
the payment of money, such acts are determined by other existing legislations
since it is not specified in Sec. 119, e.g. in Art. 1231 of the Civil Code which
enumerates the modes of extinguishing obligations. None of the modes outlined
therein is applicable in the instant case as Sec. 119 contemplates of a situation
where the holder is the creditor while the drawer is the debtor. In this case,
Victoriano was no longer Moulics creditor at the time the jewelry was returned.
NOTES:
- State is a holder in due course.
- Moulic is liabile to State because she has no legal basis to excuse herself from
liability on her checks to a holder in due course.
- Failure to give notice of dishonor is immaterial by virtue of Sec 114(d) where the
drawer has no right to expect or require that the drawee or acceptor will honor
the instrument.