Travel-On, Inc. v. Court of Appeals
REITERATIONFacts
The Antecedents: Petitioner Travel-On, Inc. (Travel-On), a travel agency, filed a collection suit against private respondent Arturo S. Miranda for six (6) dishonored checks totaling P115,000.00. Travel-On alleged that these checks were issued to settle Miranda's account for airline tickets sold on commission basis. Miranda admitted transactions but claimed full payment and overpayment, asserting the checks were issued for accommodation purposes to enable Travel-On's General Manager to show the company's accounts receivable were good to the Board of Directors. Procedural History: The trial court ruled in favor of Miranda, ordering Travel-On to pay Miranda P8,894.91 for overpayments, P10,000.00 in moral damages for wrongful attachment, P5,000.00 for attorney's fees, and costs. The trial court found that the indebtedness was not satisfactorily established and the checks were for accommodation. Upon reconsideration, the trial court increased moral damages to P50,000.00. The Court of Appeals affirmed the trial court's decision but reduced moral damages to P20,000.00. The Petition: Travel-On filed a Petition for Review on Certiorari, arguing that the postdated checks are per se evidence of liability and that even if for accommodation, Miranda is still liable as Travel-On is a holder for value. The Supreme Court found that both lower courts erred in rejecting the checks as evidence of indebtedness and in placing the burden of proof on Travel-On.
Issue(s)
Whether the postdated checks issued by private respondent constitute prima facie evidence of indebtedness. Whether private respondent successfully rebutted the presumption of consideration for the checks. Whether the checks were issued for accommodation purposes and if such vitiates liability to the payee. Whether the writ of attachment was wrongfully issued, warranting moral damages.
Ruling
The Supreme Court reversed and set aside the decisions of the Court of Appeals and the trial court. It ruled that private respondent Arturo S. Miranda is liable to pay petitioner Travel-On the amount of P105,000.00, with legal interest and attorney's fees. The award of moral damages to private respondent was set aside.
Ratio Decidendi
On whether the postdated checks constitute prima facie evidence of indebtedness: The Supreme Court held that checks, regular on their face, are prima facie evidence of indebtedness. The mere introduction of the instrument sued upon entitles the plaintiff to recovery. The rule is settled that a negotiable instrument is presumed to have been given for sufficient consideration unless contradicted by competent evidence. The appellate court erred in considering only the statements of account and failing to give due importance to the checks themselves, which are the most telling evidence of indebtedness. On whether private respondent successfully rebutted the presumption of consideration: The Court found that private respondent failed to satisfactorily rebut the legal presumption that the checks were issued for valuable consideration. His testimony that the checks were for accommodation to enable the General Manager to show them to the Board of Directors was deemed self-serving, uncorroborated, and a claim that the checks were merely simulated. Such a claim requires evidence of the clearest and most convincing kind, which was not submitted. The explanation was denied by the General Manager and appeared contrived. On whether the checks were issued for accommodation and if such vitiates liability to the payee: The Supreme Court clarified that the accommodation transactions recognized by the Negotiable Instruments Law (NIL) involve an accommodation party lending credit to another, who then becomes liable to a holder for value. In this case, Travel-On was the payee and presented the checks for payment, which bounced. Travel-On was not an accommodated party and realized no value on the bounced checks. Therefore, the principle of accommodation party liability to a holder for value did not apply in the manner argued by the respondent. The Court found that the "accommodation" described by the General Manager involved circumvention of foreign exchange regulations, not the NIL concept of accommodation. On whether the writ of attachment was wrongfully issued, warranting moral damages: The Court held that the award of moral damages to private respondent must be set aside because Travel-On's application for the writ of attachment rested on a sufficient basis, and no bad faith was shown on its part. Instead, the Court found that private respondent was in bad faith for issuing bad checks and then pretending to have "accommodated" the General Manager in a supposed scheme to deceive the Board of Directors and misrepresent the company's financial condition. Therefore, the issuance of the writ was justified.
Main Doctrine
Checks, regular on their face, are prima facie evidence of indebtedness, and the burden is on the issuer to prove lack of consideration, not on the payee to prove its existence. An accommodation party is liable to a holder for value, even if the holder knew of the accommodation.