Llorente v. Star City Pty Limited
REITERATIONFacts
The Antecedents: Star City Pty Limited (SCPL), an Australian corporation operating a casino in Sydney, Australia, filed a complaint for collection of sum of money against Quintin Llorente (Llorente), a patron, and Equitable PCI Bank (EPCIB). SCPL alleged that Llorente negotiated two bank drafts worth US$300,000.00 to play in SCPL's Premium Programme. EPCIB confirmed the drafts were issued on clear funds. After SCPL deposited the drafts, it received a "Stop Payment Order" advice. SCPL demanded payment from Llorente, who refused. EPCIB denied liability, stating Llorente requested the stop payment and no notice of dishonor was given. Procedural History: The Regional Trial Court (RTC) granted a writ of preliminary attachment against Llorente due to his actions indicating an intent to defraud SCPL. Llorente claimed fraud and unfair gaming practices by SCPL and questioned SCPL's legal capacity to sue. EPCIB also questioned SCPL's capacity to sue and denied liability, citing Llorente's stop payment order and lack of privity. The RTC found SCPL had legal capacity to sue and held both Llorente and EPCIB solidarily liable for the US$300,000.00 plus attorney's fees. The Court of Appeals (CA) affirmed SCPL's capacity to sue but modified the RTC decision by absolving EPCIB from liability, citing an indemnity agreement between Llorente and EPCIB and the principle of unjust enrichment. Both Llorente and SCPL filed petitions for review on certiorari. The Petition: Llorente petitions, arguing the CA erred in affirming the RTC's decision despite alleged lack of jurisdiction, in finding SCPL had legal capacity to sue under the isolated transaction rule, and in not finding the appointment of an attorney-in-fact by SCPL a violation of the Corporation Code. SCPL petitions, arguing the CA erred in modifying the RTC decision by absolving EPCIB and in anchoring its decision on unproven evidence.
Issue(s)
Whether the CA erred in affirming the RTC Decision despite the latter's alleged lack of jurisdiction over the subject matter of the complaint. Whether the CA erred in finding that SCPL has legal capacity to sue under the isolated transaction rule. Whether the designation of the law firm of Jimeno, Jalandoni and Cope (JJC Law) as attorney-in-fact of SCPL constitutes a gross violation of Section 69 of the Corporation Code. Whether the CA erred when it modified the RTC Decision by absolving EPCIB of any liability. Whether in absolving EPCIB the CA ignored the express provisions of law and anchored its ratio on evidence that was not at all proven in trial.
Ruling
The Supreme Court denied Llorente's petition (G.R. No. 212050) and granted SCPL's petition (G.R. No. 212216). The Court partially reversed and set aside the CA Decision and Resolution, reinstating the RTC Decision with modification. It held that both Llorente and EPCIB are individually and primarily liable to SCPL. The dispositive portion of the RTC decision was reinstated with modifications regarding interest rates.
Ratio Decidendi
On the issue of jurisdiction: The Court held that the RTC had jurisdiction over the complaint for collection of sum of money, as the amount demanded exceeded the jurisdictional threshold for Regional Trial Courts in Metro Manila. Furthermore, even if the stop payment occurred in Australia, the subject drafts were drawn by EPCIB, a Philippine bank, thus Philippine courts have territorial jurisdiction. On SCPL's capacity to sue under the isolated transaction rule: The Court reiterated that a foreign corporation not doing business in the Philippines may sue before Philippine courts for an isolated transaction. SCPL sufficiently pleaded its capacity to sue by averring in its complaint that it is a foreign corporation not doing business in the Philippines and is suing upon a singular and isolated transaction. The appointment of an attorney-in-fact does not affect this capacity. On the alleged violation of Section 69 of the Corporation Code: The Court found this issue irrelevant to SCPL's capacity to sue under the isolated transaction rule. The Court also noted that Llorente, by filing a counterclaim for damages against SCPL, implicitly admitted SCPL's capacity to be sued in the Philippines, making his argument inconsistent. On EPCIB's liability and the CA's absolvement: The Court found that the CA erred in absolving EPCIB from liability. The Court held that EPCIB, as the drawer of the bank drafts, is liable under the Negotiable Instruments Law (NIL). The stop payment order by Llorente did not discharge EPCIB's liability, as it triggered the holder's right of recourse against secondarily liable parties, including the drawer. The CA's reliance on the Indemnity Agreement was misplaced because it was not formally offered as evidence and, even if considered, it would not bind SCPL, a holder in due course, due to the principle of relativity of contracts. The Court also rejected the unjust enrichment argument, stating that the benefit was received by Llorente, not SCPL, and that EPCIB's liability arises from its engagement as a drawer. On the nature of EPCIB's liability: The Court clarified that while EPCIB's liability as a drawer is generally secondary, it became primary due to the stop payment order, similar to dishonor and notice. The Court rejected the claim of no privity of contract between SCPL and EPCIB, as EPCIB's liability stems from its role as a drawer of negotiable instruments. The Court found no legal basis for solidary liability between Llorente and EPCIB, but rather individual and primary liability for each as endorser and drawer, respectively. SCPL could proceed against either or both, but not recover more than the awarded damages. The Court also granted EPCIB's cross-claim against Llorente.
Main Doctrine
A foreign corporation not doing business in the Philippines may sue before Philippine courts on an isolated transaction, and its capacity to sue is sufficiently pleaded if it avers such fact in its complaint. The liability of a drawer of a negotiable instrument, such as a bank draft, is secondary but becomes primary upon dishonor or stop payment order, and such liability cannot be evaded by invoking unjust enrichment or lack of privity of contract, especially when the holder is a holder in due course.