Nyco Sales Corporation vs BA Finance Corporation

G.R. No. 71694 | August 16 1991

FACTS:

Santiago and Renato Fernandez (Fernandezes), acting in behalf of Sanshell

Corporation, approached Rufino Yao, president and general manager of Nyco Sales
Corporation (Nyco), for credit accommodation requesting for discounting privileges. Yao agreed,
which make the Fernandezes issue a post-dated BPI check for P60,000, payable to Nyco. Nyco
endorsed the BPI check in favor of BA Finance. Thereafter, BA Finance issued a check payable
to Nyco, endorsing it in favor of Sanshell.

Accompanying the exchange of checks was a Deed of Assignment executed by Nyco

Sales (assignor) in favor of BA Finance (assignee) with the conformity of Sanshell. Under the
said Deed, the subject of the discounting was P60,000.00 BPI check. At the back thereof and of
every deed of assignment was the Continuing Surety Agreement whereby the Fernandezes
unconditionally guaranteed full, faithful and prompt payment and discharge of any and all
indebtedness of Nyco.

BPI check was dishonored. BA Finance informed the Fernandezes who issued a
substitute Security Bank and Trust Company Check, which was again dishonored. Nyco and the
Fernandezes failed to settle obligation, hence this case. Nyco asserts that: (a) the appellate
court erred in affirming its liability for the BPI check despite the liability for SBTS; and (b) Nyco is
discharged when BA Finance failed to give a notice of dishonor for SBTC Check

ISSUE:

Whether or not Nyco Sales Corporation, as an assignor, is liable to its assignee for its
dishonored check

RULING:

The court ruled on the positive.

 The relationship between Nyco Sales and BA Finance is one of assignor-assignee.
According to Article 1628 of the Civil Code, the assignor-vendor warrants both the credit itself
(its existence and legality) and the person of the debtor (his solvency), if so stipulated, as in the
case at bar. Consequently, if there be any breach of the above warranties, the assignor-vendor
should be held answerable therefor. There is no question then that the assignor-vendor is
indeed liable for the invalidity of whatever he assigned to the assignee-vendee. Considering
now the facts of the case at bar, BA Finance is actually enforcing the said deed and the check
covered is merely and incidental or collateral matter. The check merely evidenced the credit
which was actually assigned to BA Finance. Thus, the designation is immaterial. Nyco is being
asked to pay what is represented by the checks.

Nyco Sales’ pretension that it had not been notified of the fact of dishonor is belied not
only by the formal demand letter issued by BA Finance but also by the fact that Nyco Sales and
Sanshell had frequent contacts before, during and after the dishonor. More importantly, as long
as the credit remains outstanding, Nyco Sales shall continue to be liable to BA Finance as its
assignor. The dishonor of an assigned check simply stresses its liability and the failure to give a
notice of dishonor will not discharge it from such liability. This is because the cause of action
stems from the breach of the warranties embodied in the Deed of Assignment, and not from the
dishonoring of the check alone.