DEVELOPMENT BANK OF RIZAL vs. SIMA WEI, ET AL.

G.R. No. 85419 March 9, 1993

--complete undelivered
FACTS:
Respondent Sima Wei executed and delivered to petitioner Bank a promissory note
engaging to pay the petitioner Bank or order the amount of P1,820,000.00. Sima Wei
subsequently issued two crossed checks payable to petitioner Bank drawn against China
Banking Corporation in full settlement of the drawer's account evidenced by the
promissory note. These two checks however were not delivered to the petitioner-payee or
to any of its authorized representatives but instead came into the possession of respondent
Lee Kian Huat, who deposited the checks without the petitioner-payee's indorsement to
the account of respondent Plastic Corporation with Producers Bank. Inspite of the fact
that the checks were crossed and payable to petitioner Bank and bore no indorsement of
the latter, the Branch Manager of Producers Bank authorized the acceptance of the checks
for deposit and credited them to the account of said Plastic Corporation.
ISSUE:
Whether petitioner Bank has a cause of action against Sima Wei for the undelivered
checks.
RULING:
No. A negotiable instrument must be delivered to the payee in order to evidence its
existence as a binding contract. Section 16 of the NIL provides that every contract on a
negotiable instrument is incomplete and revocable until delivery of the instrument for the
purpose of giving effect thereto. Thus, the payee of a negotiable instrument acquires no
interest with respect thereto until its delivery to him. Without the initial delivery of the
instrument from the drawer to the payee, there can be no liability on the instrument.
Petitioner however has a right of action against Sima Wei for the balance due on the
promissory note.
JIMENEZ v BUCOY
During the Japanese occupation, Pacita Young issued three promissory notes to Pacifica
Jimenez. The total sum of the notes was P21k. All three promissory notes were couched
in this manner:
Received from Miss Pacifica Jimenez the total amount of ___________
payable six months after the war, without interest.
When the promissory notes became due, Jimenez presented the notes for payment. Pacita
and her husband died and so the notes were presented to the administrator of the estate of
the spouses (Dr. Jose Bucoy). Bucoy manifested his willingness to pay but he said that
since the loan was contracted during the Japanee occupation the amount should be
deducted and the Ballantyne Schedule should be used, that is peso-for-yen (which would
lower the amount due from P21k). Bucoy also pointed out that nowhere in the not can be

seen an express promise to pay because of the absence of the words I promise to
pay
ISSUE: Whether or not Bucoy is correct.
HELD: No. The Ballantyne schedule may not be used here because the debt is not
payable during the Japanese occupation. It is expressly stated in the notes that the
amounts stated therein are payable six months after the war. Therefore, no reduction
could be effected, and peso-for-peso payment shall be ordered in Philippine currency.
The notes also amounted in effect to a promise to pay the amounts indicated therein. An
acknowledgment may become a promise by the addition of words by which a promise of
payment is naturally implied, such as, payable, payable on a given day, payable on
demand, paid . . . when called for, . . . To constitute a good promissory note, no
precise words of contract are necessary, provided they amount, in legal effect, to a
promise to pay. In other words, if over and above the mere acknowledgment of the debt
there may be collected from the words used a promise to pay it, the instrument may be
regarded as a promissory note.