STELCO MARKETING CORPORATION V. CA Supreme Court held that Stelco IS NOT A HOLDER IN DUE COURSE.
d that Stelco IS NOT A HOLDER IN DUE COURSE. The record shows is that:
June 17, 1992 | GR No. 96160 | Narvasa, J. | Second Division | Holder in Due Course
DIGEST MADE BY:
Dave U
CLUE: Steel Bars
PETITIONER: STELCO MARKETING CORPORATION
RESPONDENTS: HON. COURT OF APPEALS and STEELWELD CORPORATION OF THE
PHILIPPINES, INC.
DOCTRINE:
"A holder in due course," says the law, [SEC. 52, Negotiable Instruments Law, Act No. 2031] "is
a holder who has taken the instrument under the following conditions: (a) That it is complete
and regular upon its face; (b) That he became the holder of it before it was overdue, and
without notice that it had been previously dishonored, if such was the fact; (c) That he took it
in good faith and for value; (d) That at the time it was negotiated to him, he had no notice of
any infirmity in the instrument or defect in the title of the persons negotiating it."
RECIT- READY SUMMARY:
Stelco is engaged in the distribution and sale of structural steel bars. On seven different
occasions, it sold to RYL Construction steel bars at an aggregate price of Php 126,859.61.
According to the invoices issued by Stelco, it stipulated that RYL will pay “Cash on Delivery.”
However, RYL failed to pay despite the demands of Stelco. On April 4, 1981, RYL gave to
Armstrong Industries – a sister corporation of Stelco a cheque drawn against Metrobank in
the amount of Php 126,859.61. The cheque was signed by Steelweld Corporation’s President
Peter Limson as an accommodation maker at the behest of RYL. When Armstrong deposited
the cheque, it was dishonored because it was drawn against insufficient funds. As a result, a
criminal complaint was filed against Limson for violation of BP 22. The trial court acquitted
Limson, but stated that it does not release Steelweld of liability under Section 29 of the NIL.
Later on, Stelco filed with the RTC of Caloocan City recovery of the value of steel bars it sold
to RYL. The trial court ruled in favor of Stelco ordering Steelweld to pay Php 126,129.86 plus
legal interest. It held that Steelweld is liable as an accommodation maker. Upon appeal, the
Court of Appeals reversed the trial court’s decision. It held that Stelco is NOT A HOLDER FOR
VALUE. In the cheque, Stelco is not a payee, indorsee, or depositor thereof. Therefore, Stelco
has NO CAUSE OF ACTION against Steelweld. Hence, the petition.
ISSUE: Is Stelco a Holder in Due Course? – NO
Court held in the negative. According to Section 29 of the NIL, an accommodation holder is
considered liable to a holder for value/due course. In relation to this, Section 52 provides that
a holder indue course is a holder who has taken the instrument under the following conditions
(SEE CONDITIONS IN THE DOCTRINE ABOVE). In this case, from the factual antecedents, the
1 SEC. 29. Liability of an accommodation party. — An accommodation party is one who has signed the
instrument as maker, drawer, acceptor, or indorser, without receiving value therefor, and for the
purpose of lending his name to some other person. Such a person is liable on the instrument to a
(1) the STEELWELD company check in question was given by its president to R.Y. Lim; (2) it
was given only by way of accommodation, to be "used as collateral for another obligation;"
(3) in breach of the agreement, however, R.Y. Lim indorsed the check to Armstrong in payment
of an obligation; (4) Armstrong deposited the check to its account, after indorsing it; (5) the
check was dishonored. It is clear from the relevant circumstances that STELCO cannot be
deemed a holder of the check for value. It does not meet two of the essential requisites
prescribed by the statute. It did not become "the holder of it before it was overdue, and without
notice that it had been previously dishonored," and it did not take the check "in good faith and
for value."
FACTS:
1. Stelco is engaged in the distribution and sale of structural steel bars. On seven different
occasions, it sold to RYL Construction steel bars at an aggregate price of Php
126,859.61. According to the invoices issued by Stelco, it stipulated that RYL will pay
“Cash on Delivery.” However, RYL failed to pay despite the demands of Stelco.
2. On April 4, 1981, RYL gave to Armstrong Industries – a sister corporation of Stelco a
cheque drawn against Metrobank in the amount of Php 126,859.61. The cheque was
signed by Steelweld Corporation’s President Peter Limson. According to Limson, he
issued the cheque on the behest of his friend, Romeo Lim, the president of RYL. Limson
issued the cheque by was of an accommodation, only as a guaranty, but not to pay
anything.
3. When Armstrong deposited the cheque, it was dishonored because it was drawn against
insufficient funds. As a result, a criminal complaint was filed against Limson for violation
of BP 22. The trial court acquitted Limson, but stated that it does not release Steelweld
of liability under Section 29 of the NIL.
4. Later on, Stelco filed with the RTC of Caloocan City recovery of the value of steel bars it
sold to RYL. The trial court ruled in favor of Stelco ordering Steelweld to pay Php
126,129.86 plus legal interest. It held that Steelweld is liable as an accommodation
maker under Section 29 of the NIL1.
5. Upon appeal, the Court of Appeals reversed the trial court’s decision. It held that Stelco
is NOT A HOLDER FOR VALUE. In the cheque, Stelco is not a payee, indorsee, or depositor
thereof. Therefore, Stelco has NO CAUSE OF ACTION against Steelweld.
6. Aggrieved, Stelco filed an appeal before the Supreme Court.
ISSUE/S:
1. Is Stelco a holder for value/holder in due course? — NO
RULING:
holder for value notwithstanding such holder at the time of taking the instrument knew him to be only an
accommodation party.
1
WHEREFORE, the petition is DENIED and the Decision of the Court of Appeals in CA-G.R. CV
No. 13418 is AFFIRMED in toto. Costs against petitioner.

RATIO:
1. NO

● The court held in the negative. According to Section 29 of the NIL, an

accommodation holder is considered liable to a holder for value/due course. In
relation to this, Section 52 provides that a holder indue course is a holder who has
taken the instrument under the following conditions:
o That it is complete and regular upon its face;
o That he became the holder of it before it was overdue, and without notice that
it has been previously dishonored;
o That he took it in good faith and for value; and
o That at the time it was negotiated to him, he had no notice of any infirmity in the
instrument or defect in the title of the person negotiating it.
● In this case, from the factual antecedents, the Supreme Court held that Stelco IS
NOT A HOLDER IN DUE COURSE. The record shows is that: (1) the STEELWELD
company check in question was given by its president to R.Y. Lim; (2) it was given
only by way of accommodation, to be "used as collateral for another obligation;" (3)
in breach of the agreement, however, R.Y. Lim indorsed the check to Armstrong in
payment of an obligation; (4) Armstrong deposited the check to its account, after
indorsing it; (5) the check was dishonored.
● It is clear from the relevant circumstances that STELCO cannot be deemed a holder
of the check for value. It does not meet two of the essential requisites prescribed by
the statute. It did not become "the holder of it before it was overdue, and without
notice that it had been previously dishonored," and it did not take the check "in good
faith and for value."