FAR EAST REALTY INVESTMENT INC. VS.

CA Parties: Drawer - Dy Hian Tat Indorser - Gaw Suy/Siy Chee Holder - Far East Realty Investment Real Payee - Sin Chin Juat Grocery Drawee bank - China Bank Doctrine: Where the instrument is not payable on demand, presentment must be made on the day it falls due. Where it is payable on demand, presentment must be made within a reasonable time after issue, except that in the case of a bill of exchange, presentment for payment will be sufficient if made within a reasonable time after the last negotiation thereof. 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. No hard and fast demarcation line can be drawn between what may be considered as a reasonable or an unreasonable time, because reasonable time depends upon the peculiar fa cts and circumstances in each case. Facts: Private respondents asked the petitioner to extend an accommodation loan in the sum of P4,500.00. September 13, 1960: Dy Hian Tat drew check P4,500, which should be deposited only after 1 month Respondents delivered to the petitioner a check for P4,500.00, drawn by Dy Hian Tat, and signed by them at the back of said check, with the assurance that after one month from September 13, 1960, the said check would be redeemed by them by paying cash in the sum of P4,500.00, or the said check can be presented for payment on or immediately after one month. Petitioner agreed and extended an accommodation loan March 5, 1964: Check was presented for payment China Banking Corporation, but bounced and was not cashed by said bank, because the current account of the drawer had already been closed. Petitioner demanded payment from respondents but the latter failed and refused to pay notwithstanding repeated demands. Both private respondents raised the defense that both have been wholly discharged by delay in presentment of the check for payment. CFI ruled in favor of the petitioner. CA reversed ruling in that the check was not given as collateral to guarantee a loan secured since the check passed through other hands before reaching the petitioner and the said check was not presented within a reasonable time. Hence this petition. Petitioner argues that presentment for payment and notice of dishonor are not necessary as when funds are insufficient to meet a check, thus the drawer is liable, whether such presentment and notice be totally omitted or merely delayed. Respondents maintain that check was drawn by Dy Bun Kim, son of Dy and delivered to Sin Chin Juat Grocery for payment of grocery goods Issues: 1. WON Far East can collect 2. WON presentment for payment can be dispensed with 2. WON presentment for payment and notice of dishonor of the questioned check were made within reasonable time Held: 1. No. Far east cannot collect due to lack of consideration. The check was drawn and delivered to Sin Chin Juat Grocery for payment of grocery goods 2. No. Where the instrument is not payable on demand, presentment must be made on the day it falls due. Where it is payable on demand, presentment must be made within a reasonable time after issue, except

that in the case of a bill of exchange, presentment for payment will be sufficient if made within a reasonable time after the last negotiation thereof (Section 71, Negotiable Instruments Law). 3. No. It is obvious in this case that presentment and notice of dishonor were not made within a reasonable time. 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 (Citizens Bank Bldg. v. L & E. Wertheirmer 189 S.W. 361, 362, 126 Ark, 38, Ann. Cas. 1917 E, 520). Notice may be given as soon as the instrument is dishonored; and unless delay is excused must be given within the time fixed by the law (Section 102, Negotiable Instruments Law). In the instant case, the check in question was issued on September 13, 1960, but was presented to the drawee bank only on March 5, 1964, and dishonored on the same date. After dishonor by the drawee bank, a formal notice of dishonor was made by the petitioner through a letter dated April 27, 1968. Under these circumstances, the petitioner undoubtedly failed to exercise prudence and diligence on what he ought to do al. required by law. The petitioner likewise failed to show any justification for the unreasonable delay. No hard and fast demarcation line can be drawn between what may be considered as a reasonable or an unreasonable time, because reasonable time depends upon the peculiar facts and circumstances in each case

PHILIPPINE NATIONAL BANK VS. SEETO Parties: Gan Yek Kiao drawer Benito Seeto indorser PNB Surigao bank where cheque was presented for payment PNB Cebu drawee bank Doctrine: SEC. 84. Liability of person secondarily liable, when instrument dishonored. Subject to the provisions of this Act, when the instrument is dishonored by nonpayment, an immediate right of recourse to all parties secondarily liable thereon accrues to the holder. Section 84 of the Negotiable Instruments Law must be coupled with Section 186 of the same law which states: 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.

Facts: In 1948, Gan Yek Kiao drew a check in the amount of P5,000.00 payable to cash or to bearer. The check was delivered to Benito Seeto. Seeto presented the check to Philippine National Bank for payment. PNB gave Seeto the amount of the check. The check was later dishonored. PNB asked Seeto to refund the amount given to him but Seeto refused because he said the cause of the dishonor was PNBs unreasonable delay in encashing it. PNB invoked Section 84 of the Negotiable Instruments Law which states: SEC. 84. Liability of person secondarily liable, when instrument dishonored. Subject to the provisions of this Act, when the instrument is dishonored by nonpayment, an immediate right of recourse to all parties secondarily liable thereon accrues to the holder. Issue: WON Seeto is liable (as indorser) Held: No. Seeto is not liable because PNB caused unreasonable delay. It is shown that the drawer had enough funds when he issued the check in question, and that had it not been for the unreasonable delay in its presentation for payment, the petitioner herein would have been able

to receive payment therefor. The check is dated March 10, and was cashed by the petitioner's agency on March 13, 1948. It was not mailed until seven days thereafter, i.e., on March 20, 1948, or ten days after issue. No excuse was given for this delay. Assuming that it took one week, or say ten days, or until March 30, for the check to reach Cebu, neither can there be any excuse for not presenting it for payment at the drawee bank until April 9, 1948, or 10 days after it reached Cebu. We, therefore, find no reason for disturbing the conclusion of the Court of Appeals that there was unreasonable delay in the presentation of the check for payment at the drawee bank, and that is a consequence thereof, the indorser, respondent herein, was thereby discharged. Section 84 of the Negotiable Instruments Law must be coupled with Section 186 of the same law which states: 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. In effect, Seeto was discharged from liability as a secondary party. Section 186 expressly requires that a check must be presented for payment within a reasonable time after issue. It has been ruled in a lot of cases that unreasonable delay in the presentment of a negotiable instrument discharges a drawer only to the extent of the loss caused thereby but an indorser is wholly discharged thereby irrespective of any question of loss or injury. Only when there is affirmative proof that the indorser knew when he cashed the check that there would be no funds in the bank to meet it can this rule be avoided. CRYSTAL VS. CA PAPA VS. VALENCIA Parties: Anne Butte seller/mortgagor Papa agent of Butte/seller Penarroyo buyer Valencia agent of Penarroyo/buyer Associated Bank mortgagee bank Doctrine: While it is true that the delivery of check produces payment only when encashed (pursuant to Art. 1249, Civil Code), the rule is otherwise if the debtor is prejudiced by the delay in presentment. (Here in this case, the petitioner now alleges that he did not present the check, ten years after the same was paid to him as part of the purchase price of the property.) Check acceptance implied an undertaking of due diligence in presenting it for payment. If the person who receives it sustains loss by want of this diligence, this will operated as actual payment of the debt or obligation for which the check was given. The debtor cannot now be held liable if non-presentment of the check was through the fault of the creditor. Facts: 1. The case arose from a sale of a parcel of land allegedly made to private respondent Penarroyo by petitioner acting as attorney-in-fact of Anne Butte. The purchaser, through Valencia, made a check payment in the amount of P40,000 and in cash, P5,000. Both were accepted by petitioner as evidenced by various receipts. It appeared that the said property has already been mortgaged to the bank previously together with other properties of Butte. 2. When Butte passed away, the private respondent Penarroyo now demanded that the title to the property be conveyed to him, however the bank refused. Hence, the filing of a suit for specific performance by private respondents against the petitioner. The lower court ruled in favor of the private respondents Penarroyo/Valencia and ordered herein petitioner the conveyance or the property or if not, its payment. The petitioner Papa appealed the lower court's decision alleging that the sale was not consummated as he never encashed the check given as part of the purchase price.

3. The Court of Appeals affirmed with modifications the lower court's decision. It held that there was a consummated sale of the subject property despite. Issue: WON the check is a valid tender of payment/WON there was a valid sale of the subject property RULING: Yes. While it is true that the delivery of check produces payment only when encashed (pursuant to Art. 1249, Civil Code), the rule is otherwise if the debtor is prejudiced by the delay in presentment. (Here in this case, the petitioner now alleges that he did not present the check, ten years after the same was paid to him as part of the purchase price of the property.) Check acceptance implied an undertaking of due diligence in presenting it for payment. If the person who receives it sustains loss by want of this diligence, this will operated as actual payment of the debt or obligation for which the check was given. The debtor cannot now be held liable if non-presentment of the check was through the fault of the creditor. ___________________________________________________________ ___ Facts: Myron Papa, acting as attorney-in-fact of Angela Butte, allegedly sold a parcel of land in La Loma, Quezon City to Felix Penarroyo. However, prior to the alleged sale, the land was mortgaged by Butte to Associated Banking Corporation along with other properties and after the alleged sale but prior to the propertys release by delivery, Butte died. Associated Bank refused to release the property to Penarroyo unless and until the other mortgaged properties by Butte have been redeemed and because of this Penarroyo settled to having the title of the property annotated. It was later discovered that the mortgage rights were transferred to one Tomas Parpana, administrator of the estate of Ramon Papa Jr. and his since then been collecting rents. Despite repeated demands of Penarroyo and Valencia, Papa refused to deliver the property which led to a suit for specific performance. The trial court ruled in favor of Penarroyo and Valencia. On appeal to CA, Papa averred that the sale of the property was not consummated since the PCIB check issued by Penarroyo for payment worth 40000 pesos was not encashed by him. CA held that Papa in fact encashed the check by means of a receipt. Papa cited that according to Art 1249 of the Civil Code, payment of checks only produce effect once they have been encashed and he insists that he never encashed the check. He further alleged that if check was encashed, it should have been stamped as such or at least a microfilm copy. It must be noted that the check was in possession of Papa for ten (10) years from the time payment was made to him. Issue: WON the check was encashed and can be considered effective as payment Held: YES. The Court held that 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 is given. In this case, granting that check was never encashed, Papas failure to do so for more than ten (10) years undoubtedly resulted in the impairment of the check through his unreasonable and unexplained delay. 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.

INTERNATIONAL CORPORATE BANK VS. GUECO Parties: Gueco spouses issuer of managers check; applied for loan International Corporate Bank (now Union Bank) holder of cheque Doctrine: 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.i[32] 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. Facts: Gueco spouses obtained a loan from ICB (now Union Bank) to purchase a car. In consideration thereof, the debtors executed PNs, and a chattel mortgage was made over the car. The spouses defaulted in payment of their obligations and despite the lowering of the amount to be paid, they still failed to pay P150,000. Spouses issued a managers check in favor of the bank. The car was still detained for the spouses refused to sign the joint motion to dismiss. The bank averred that the joint motion to dismiss is part of standard office procedure to preclude the filing of other claims. Because of this, the spouses filed an action for damages against the bank. And by the time the case was instituted, the check had become stale in the hands of the bank. Issue: #1 WON Bank erred in not encashing the cheque and thereby caused delay #2 WON Spouses should replace the check after it became stale Held: #1 YES. In the case at bar, there is no doubt that the petitioner bank held on the check and refused to encash the same because of the controversy surrounding the signing of the joint motion to dismiss. We see no bad faith or negligence in this position taken by the Bank. #2 YES. It appeared that the check has not been encashed. The delivery of the managers check did not constitute payment. The original obligation to pay still exists. Indeed, the circumstances that caused the non-presentment of the check should be considered to determine who should bear the loss. In this case, ICB held on the check and refused to encash the same because of the controversy surrounding the signing of the joint motion to dismiss. There is no bad faith or negligence on the part of ICB. The main issue though unrelated to Negotiable Instruments Law in this case was whether or not the signing of the joint motion to dismiss a part of the compromise agreement between the spouses and the bank. The answer is no, it is not a part of the compromise agreement entered by the parties. And thus, the signing is dispensible in releasing the car to the spouses. 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. A check should be presented for payment within a reasonable time after its issue. Here, what is involved is a managers check, which is essentially a banks own check and may be treated as a PN with the bank as a maker. 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 delaybut here there is no loss sustained. Still, such failure to present on time does not wipe out liability.

PNB VS CA Parties: GSIS drawer Augusto Lim holder PCIB bank where check was presented PNB drawee bank Doctrine: Failure to return the check to the PCIB implied, under the current banking practice, that the PNB considered the check good and would honor it Rule of Sec 62 applies in the case of a drawee who pays a bill without having previously accepted it.16 o Section 62 of Act No. 2031 provides: The acceptor by accepting the instrument engages that he will pay it according to the tenor of his acceptance; and admits: (a) The existence of the drawer, the genuineness of his signature, and his capacity and authority to draw the instrument; and (b) The existence of the payee and his then capacity to indorse. Facts: Augusto Lim deposited in his current account with PCI Bank (Padre Faura Branch) a GSIS check drawn against PNB. The signatures of the General Manager and Auditor of GSIS were forged. PCIBank stamped at the back of the check All prior indorsements or lack of indorsements guaranteed, PCI Bank. PCIBank sent the check to PNB through the Central Bank. PNB did not return the check to PCIBank; and thus PCIBank credited Lims account. As GSIS has informed PNB that the check was lost two months before said transaction, its account was recredited by PNB upon its demand (due to the forged check). PNB requested for refund with PCI Bank. The latter refused. Note:In this connection, it will be recalled that the PCIB did not cash the check upon its presentation by Augusto Lim; that the latter had merely deposited it in his current account with the PCIB; that, on the same day, the PCIB sent it, through the Central Bank, to the PNB, for clearing; that the PNB did not return the check to the PCIB the next day or at any other time; that said failure to return the check to the PCIB implied, under the current banking practice, that the PNB considered the check good and would honor it; that, in fact, the PNB honored the check and paid its amount to the PCIB; and that only then did the PCIB allow Augusto Lim to draw said amount from his aforementioned current account. Issue: Who shall bear the loss resulting from the forged check. Held: PNB is liable. Its negligence was the main and proximate cause for the corresponding loss The collecting bank is not liable as the forgery existing are those of the drawers and not of the indorsers. The indorsement of the intermediate bank does not guarantee the signature of the drawer. PNBs failure to return the check to the collecting bank implied that the check was good. In fact, PNB even honored the check even if GSIS has reported two months earlier that the check was stolen and the bank thus should stop payment. PNBs negligence was the main and proximate cause for the corresponding loss. PNB thus should bear such loss. Upon payment by PNB, as drawee, the check ceased to be a negotiable instrument, and became a mere voucher or proof of payment. PCIBs guarantee was only those of indorsements, that doesnt include forgery of the drawer.ii