FAR EAST REALTY V CA

October 5, 1988

P: Far East Realty Investment Inc.
PR: Dy Hian Tat, Siy Chee and Gaw Suy An

FACTS:

Case:
PR faces a charge for the collection and payment of P4,500

Antecedent:
1960, PR extended a loan amounting to P4,500 to P, in which
they promised to pay jointly and severally in one month time,
with interest.

Check bounced. Not chased by Chinabank. PR failed and
regused to pay notwithstanding repeated demands.

PR Suy An alleged that hes been wholly discharged by delay in
presentment as he signed as indorser for the principal Victory
Hardware, not for his private capacity. Thus, not personally
liable.

PR Hian Tat allesged that he never had any transaction or
negotiation with P at anytime. Said check was delivered by to
him to a Grocery store, not to P. Thus, P has no recourse
against the PRs (immediate indorser) as he is not a holder for
value. Moreover, it was only deposited for payment 4 years
later. THIS UNREASONABLE DELAY in presentment wholly
discharged not only the indorser but also the drawer.


ISSUE: WON the presentment and notice of dishonor were
made within a reasonable time.

HELD: No.


RATIO:

Check issued on 1960
Presented and dishonored to and by the drawee only on 1964
Formal notice of dishonor was made by the petitioner on 1968

P failed to exercise prudence and diligence required by law
P failed to show any justification for the unreasonable delay
P cannot be considered a HDC and for value
Thus, he cannot recover the P4,500.

PRs can only be liable if and only if P presented for payment on
the date and period mentioned in the instrument, or within a
reasonable time after issue. (within one month)

DOCTRINE:

When not payable on demand, presentment must be made
on the day it is due. When it is payable on demand, it must be
made within a reasonable time after issue (PN) / after the last
negotiation thereof (BOE). (Sec. 71)
"Reasonable time" has been defined as so much time as is
necessary under the circumstances for a reasonable prudent
and diligent man to do, conveniently, what the contract or duty
requires should be done, having a regard for the rights, and
possibility of loss, if any, to the other party.
Depends upon:
Peculiar facts and circumstance in each case
Notice may be given as soon as the instrument is dishonored,
and unless the delay is excused, it must be given within the time
fixed by the law. (Sec. 102)
DISPOSITIVE: Petition dismissed. P cannot recover the money.


PNB V BENITO SEETO
August 13, 1952

Drawer: Gan Yek Kiao, through PNB Surigao Branch
Drawee Bank: PNB Cebu Branch

FACTS:

1948, Seeto presented a check to PNB amounting to P5K dated
at Cebu on March 10, 1948, payable to cash or bearer, drawned
by Kiao against PNB Cebu Branch.

He subsequently indorsed the check. PNB accepted it and paid
P P5K therefor. The check was mailed to PNBs Cebu Branch
but was dishonored for insufficient funds.

PNB then sent a letter to Seeto for refund of the check. Seeto
refused to make the refund demanded, claiming that during the
negotiation, PNB had sufficient funds, and that if PNBs Surigao
agency did not delay to forward the check, it would have been
paid.

PNB asserts that Seeto made assurances that should the
drawer be dishonored hell refund the amount. Seeto however
denied such claim.

ISSUE: WON PNB was guilty of unreasonably retaining and
withholding the check, which if true, would discharge Seeto from
liability.

HELD: Yes.

RATIO:

The drawer had enough funds for the check. Were it not for his
unreasonable delay in its presentation for payment, petitioner
would have been able to receive payment therefor. This
unreasonable delay discharged Seeto from liability.

DOCTRINE:

An indorser has an obligation to assure refunds in cases of
check dishonor. However, this obligation is discharged by an
unreasonable delay in the presentation of the check for
payment.

SEC. 84. Liability of person secondarily liable, when
instrument dishonored. Subject to the provisions of
this Act, when the instrument is dishonored by
nonpayment, as immediate right of recourse to all parties
secondarily liable thereon accrues to the holder.
BOE, or instruments in general, are supposed to be passed on
with promptness in the ordinary course of business transactions;
not to be retained or kept for such time as the holder may want,
otherwise the smooth flow of commercial transactions would be
hindered.

Checks must be presented for payment within a reasonable time
after its issue.
SEC. 186. Within what time a check must be presented. A
check must be presented for payment within a reasonable time
after its issue or the drawer will be discharged from liability
thereon to the extent of the loss caused by the delay.












CRYSTAL V CA
June 18, 1976

P: Raymundo Crystal
PR: Ocang, Pacita, Teodulo, Felicisimo, Pablo, Dioscora and
Rodrigo De Gracia

FACTS:

1975, Crystal used a check in paying the redemption price of the
property sold at an execution sale. The value of the check had
never been realized because it had either been dishonored or
become stale.

IF check in question had been dishonored.
Redemption was null and void.

IF it had only become stale, its non-presentment would
prejudice Mr. Crystal as redemptioner.

The validity of the redemption is in question.

ISSUE:

WON the redemption made by Mr. Crystal to Mrs. Ocang is
legal and effective.

HELD:

P has ready evidence showing that when Ocang secured the
writ of possession in question, she had already been paid the
full amount of the check in dispute.

A compromise had already been agreed upon by the parties,
although not yet approved by the court.

Ocang made admissions that the issue with regard to the
dishonor or becoming stale of the check has ceased to have
legal significance.
DOCTRINE:

IF check in question had been dishonored.
Redemption was null and void.

IF it had only become stale, its non-presentment would
prejudice Mr. Crystal as redemptioner.

DISPOSITIVE:

RTC is remanded for further proceedings.




























PAPA V A.U. VALENCIA
January 23, 1998

Negotiable Instruments Law 284 SCRA 643 Consummation
of Sale in Lieu of Check Payment

Myron Papa is the administrator of the estate of Angela Butte (a
290sqm land in Retiro, La Loma).

In 1973, as her attorney in fact, he sold a portion of said estate
to Felix Pearroyo through A.U. Valencia and Co. Inc.
Pearroyo gave Papa P5,000.00 plus a check worth
P40,000.00.

1977, certificate of title was released. However, PR discovered
that P had been collecting monthly rentals from tenants of the
property despite the fact that its sold to PRs already.
Notwithstanding demands, Papa refused and failed to deliver
the title to Pearroyo.

A litigation ensued and ten years after, Papa argued that the
sale between him and Pearroyo was never consummated
because he did not encash the P40,000.00 check and that the
P5,000.00 cash was merely earnest money. This caused PR
Jao mental anguish and serious anxiety.

ISSUE: WON the sale never consummated, as he did not
encash the check.

HELD:

There was a sale. After more than ten (10) years from the
payment in part by cash and in part by check, the presumption
is that the check had been encashed.

Granting that Papa had never encashed the check, his failure to
do so for more than ten (10) years undoubtedly resulted in the
impairment of the check through his unreasonable and
unexplained delay.


DOCTRINE:

While it is true that the delivery of a check produces the effect of
payment only when it is cashed, pursuant to Article 1249 of the
Civil Code, the rule is otherwise if the debtor (Pearroyo) is
prejudiced by the creditors (Papas) unreasonable delay in
presentment.

The acceptance of a check implies an undertaking of due
diligence in presenting it for payment, and if he from whom it is
received sustains loss by want of such diligence, it will be held
to operate as actual payment of the debt or obligation for which
it was given.

Unless presentment is excused, the drawer cant be held liable
irrespective of loss or injury if no presentment is made at all.

DISPOSITIVE:

Respondents therefore had the right to compel petitioner to
deliver to them the title and the peaceful possession and
enjoyment of the lot in question.













THE INTERNATIONAL CORPORATE BANK (NOW UNION
BANK OF THE PHILIPPINES) VS. SPOUSES GUECO
[GR 141968, 12 February 2001]
First Division, Kapunan (J): 4 concur
Facts: Spouses Francis S. Gueco and Ma. Luz E. Gueco
obtained a loan from petitioner International Corporate Bank
(now Union Bank of the Philippines) to purchase a car a
Nissan Sentra 1600 4DR, 1989 Model.
In consideration thereof, the Spouses executed promissory
notes which were payable in monthly installments and chattel
mortgage over the car to serve as security for the notes. The
Spouses defaulted in payment of installments. Consequently,
the Bank filed on 7 August 1995 a civil action (Civil Case 658-
95) for "Sum of Money with Prayer for a Writ of Replevin" before
the Metropolitan Trial Court of Pasay City, Branch 45. On 25
August 1995, Dr. Francis Gueco was served summons and was
fetched by the sheriff and representative of the bank for a
meeting in the bank premises. Desi Tomas, the Bank's Assistant
Vice President demanded payment of the amount of
P184,000.00 which represents the unpaid balance for the car
loan. After some negotiations and computation, the amount was
lowered to P154,000.00, However, as a result of the non-
payment of the reduced amount on that date, the car was
detained inside the bank's compound. On 28 August 1995, Dr.
Gueco went to the bank and talked with its Administrative
Support Auto Loans/Credit Card Collection Head, Jefferson
Rivera. The negotiations resulted in the further reduction of the
outstanding loan to P150,000.00.
On 29 August 1995, Dr. Gueco delivered a manager's check in
the amount of P150,000.00 but the car was not released
because of his refusal to sign the Joint Motion to Dismiss. It is
the contention of the Gueco spouses and their counsel that Dr.
Gueco need not sign the motion for joint dismissal considering
that they had not yet filed their Answer. the Bank, however,
insisted that the joint motion to dismiss is standard operating
procedure in their bank to effect a compromise and to
preclude future filing of claims, counterclaims or suits for
damages.
After several demand letters and meetings with bank
representatives, the Gueco spouses initiated a civil action for
damages. The RTC held that there was a meeting of the minds
between the parties as to the reduction of the amount of
indebtedness and the release of the car but said agreement did
not include the signing of the joint motion to dismiss as a
condition sine qua non for the effectivity of the compromise.
The court further ordered the bank to return immediately the
subject car to the spouses in good working condition; and
to pay the spouses the sum of P50,000.00 as moral damages;
P25,000.00 as exemplary damages, and P25,000.00 as
attorney's fees, and to pay the cost of suit. In other respect, the
court affirmed the decision of the Metropolitan Trial Court
Branch 33.
The bank filed the petition for review on certiorari with the
Supreme Court.
(Short facts: In the meeting of 29 August 1995, Dr. Gueco
delivered a manager's check representing the reduced amount
of P150,000.00. Said check was given to Mr. Rivera, a
representative of the bank.
However, since Dr. Gueco refused to sign the joint motion to
dismiss, he was made to execute a statement to the effect
that he was withholding the payment of the check.
Subsequently, Dr. Gueco instructed the bank to disregard the
"hold order" letter and demanded the immediate release of his
car, to which the former replied that the condition of signing the
joint motion to dismiss must be satisfied and that they had
kept the check which could be claimed by Dr. Gueco
anytime.
While there is controversy as to whether the document
evidencing the order to hold payment of the check was formally
offered as evidence by the bank, it appears that said check
has not been encashed.)
Issue: Whether the bank was negligent in opting not to deposit
or use the managers check.
Held: NO. A stale check is one which has not been presented
for payment within a reasonable time after its issue. It is
valueless and, therefore, should not be paid. Under the
negotiable instruments law, an instrument not payable on
demand must be presented for payment on the day it falls
due. When the instrument is payable on demand, presentment
must be made within a reasonable time after its issue.
In the case of a bill of exchange, presentment is sufficient if
made within a reasonable time after the last negotiation
thereof. A check must be presented for payment within a
reasonable time after its issue, and in determining what is a
"reasonable time," regard is to be had to the nature of the
instrument, the usage of trade or business with respect to such
instruments, and the facts of the particular case.
In a case, a check payable on demand which was long
overdue by about two and a half (2-1/2) years was
considered a stale check.
Failure of a payee to encash a check for more than 10 years
undoubtedly resulted in the check becoming stale. Thus, even a
delay of 1 week or two (2) days, under the specific
circumstances of the certain cases constituted
unreasonable time as a matter of law.
Herein, the check involved is not an ordinary bill of
exchange but a manager's check. A manager's check is one
drawn by the bank's manager upon the bank itself. It is similar to
a cashier's check both as to effect and use. A cashier's check is
a check of the bank's cashier on his own or another check. In
effect, it is a bill of exchange drawn by the cashier of a bank
upon the bank itself, and accepted in advance by the act of its
issuance.
It is really the bank's own check and may be treated as a
promissory note with the bank as a maker. The check
becomes the primary obligation of the bank which issues it
and constitutes its written promise to pay upon demand.
The mere issuance of it is considered an acceptance thereof. If
treated as promissory note, the drawer would be the maker and
in which case the holder need not prove presentment for
payment or present the bill to the drawee for acceptance.
Even assuming that presentment is needed, failure to
present for payment within a reasonable time will result to
the discharge of the drawer only to the extent of the loss
caused by the delay. Failure to present on time, thus, does not
totally wipe out all liability. In fact, the legal situation amounts to
an acknowledgment of liability in the sum stated in the check.
In this case, the Gueco spouses have not alleged, much less
shown that they or the bank which issued the manager's check
has suffered damage or loss caused by the delay or non-
presentment. Definitely, the original obligation to pay
certainly has not been erased.
It has been held that, if the check had become stale, it becomes
imperative that the circumstances that caused its non-
presentment be determined. Herein, the bank held on the check
and refused to encash the same because of the controversy
surrounding the signing of the joint motion to dismiss. The
Court saw no bad faith or negligence in this position taken
by the Bank.





PNB V CA and PCIB
October 29, 1968

In November 1961, GSIS advised PNB that a check bearing
check number 645915- B has been lost.

On January 15, 1962, Augusto Lim, holding GSIS Check No.
645915- B which was in the amount of P57,415.00, went to
PCIB to have the check deposited in his PCIB account.
Apparently, the check was indorsed to him by Manuel Go,
which was previously indorsed by Mariano Pulido to Go.
Pulido was the named payee in the check.

PCIB did not encash the check in favor of Augusto Lim but
rather it deposited the amount to Lims PCIB account. Lim
cannot withdraw the amount yet as it needs clearing. PCIB
stamped the check with All prior indorsements and/or Lack of
Endorsement Guaranteed, Philippine Commercial and Industrial
Bank. PCIB then sent the check to PNB for clearing.

PNB did not act on the check but it paid PCIB the amount of
the check. PCIB considered this as a manifestation that the
check was good hence it cleared Lim to withdraw the amount.

On January 31, 1962, GSIS demanded PNB to restore the
amount and PNB complied. PNB then demanded PCIB to
refund the amount of the check. PCIB refused. The lower court
ruled in favor of PCIB. This was affirmed by the Court of
Appeals. PNB argued that the indorsements are forged
(signatures of GM and the Auditor of the GSIS as drawer)
hence it has no liability.

ISSUE: Whether or not PCIB should refund the amount to PNB.

HELD: No. The question whether or not the indorsements have
been falsified is immaterial to PNBs liability as a drawee or to its
right to recover from the PCIB for, as against the drawee, the
indorsement of an intermediate bank does not guarantee
the signature of the drawer, since the forgery of the
indorsement is not the cause of the loss.

With respect to the warranty on the back of the check, it should
be noted that the PCIB thereby guaranteed all prior
indorsements, not the authenticity of the signatures of the
officers of the GSIS who signed on its behalf, because the
GSIS is not an indorser of the check, but its drawer.

Further, PNB has been negligent. It has been notified months
before about the lost check.





























METROPOL VS. SAMBOK
L-39641
February 28, 1983
De Castro, J.:

Facts:

Dr. Javier Villaruel executed a promissory note in favor of Ng
Sambok Sons Motors Co., Ltd. Payable in 12 equal monthly
installments with interest.

It is further provided that in case on non-payment of any of
the installments, the total principal sum then remaining
unpaid shall become due and payable with an additional
interest.

Sambok Motors co., a sister company of Ng Sambok Sons
negotiated and indorsed the note in favor of Metropol Financing
& investment Corporation. Villaruel defaulted in the payment,
upon presentment of the promissory note he failed to pay
the promissory note as demanded, hence Ng Sambok Sons
Motors Co., Ltd. notified Sambok as indorsee that the
promissory note has been dishonored and demanded payment.

Sambok failed to pay. Ng Sambok Sons filed a complaint for the
collection of sum of money. During the pendency of the case
Villaruel died. Sambok argues that by adding the words
with recourse in the indorsement of the note, it becomes
a qualified indorser, thus, it does not warrant that in case
that the maker failed to pay upon presentment it will pay the
amount to the holder.

Issue:
Whether or not Sambok Motors Co is a qualified
indorser, thus it is not liable upon the failure of payment of the
maker.

Held:
No. A qualified indorserment constitutes the indorser a
mere assignor of the title to the instrument. It may be made by
adding to the indorsers signature the words without recourse
or any words of similar import.

Such indorsement relieves the indorser of the general
obligation to pay if the instrument is dishonored but not of
the liability arising from warranties on the instrument as
provided by section 65 of NIL.

However, Sambok indorsed the note with recourse and even
waived the notice of demand, dishonor, protest and
presentment.

Recourse means resort to a person who is secondarily
liable after the default of the person who is primarily liable.
Sambok by indorsing the note with recourse does not make
itself a qualified indorser but a general indorser who is
secondarily liable, because by such indorsement, it agreed
that if Villaruel fails to pay the not the holder can go after it.

The effect of such indorsement is that the note was indorsed
without qualification. A person who indorses without
qualification engages that on due presentment, the note
shall be accepted or paid, or both as the case maybe, and
that if it be dishonored, he will pay the amount thereof to
the holder. The words added by Sambok do not limit his
liability, but rather confirm his obligation as general indorser.












JUDE JOBY LOPEZ V PEOPLE OF THE PHILIPPINES
June 26, 2008

1998, Lopez was charged with estafa for receiving a check
P20K knowing at the time of issue he did not have sufficient
fund and/or his account is already closed.

1999, he pleaded not guilty. Teller from DBP presented records
that the check was dishonored as the account was closed
even before the check was issued. Thus, hes convicted.

He appealed. Element of deceit not proven. Excessive penalty.

ISSUE: Whether or not deceit was proven by the prosecution

SC:

No merit from the appeal.

Art. 315 2(d) - The failure of the drawer of the check to deposit
the amount necessary to cover his check within three (3) days
from receipt of notice from the bank and/or payee or holder that
said check has been dishonored for lack or insufficiency of
funds shall be prima facie evidence of deceit constituting
false pretense or fraudulent act.

The drawer of the dishonored check is given three days from
receipt of the notice of dishonor to cover the amount of the
check, otherwise, a prima facie presumption of deceit arises.

Further it is settled that it is criminal fraud or deceit in the
issuance of a check which is made punishable under the
Revised Penal Code, and not the nonpayment of a debt.






DOCTRINE:

More importantly, the receipt by the drawer of the notice of
dishonor is not an element of the offense. Since petitioners
bank account was already closed even before the issuance
of the subject check, he had no right to expect or require
the drawee bank to honor his check. By virtue of the
aforequoted provision of law, petitioner is not entitled to be
given a notice of dishonor.

DISPOSITIVE:

Reclusion temporal.