NIL 6th week

Far East Realty v CA, 166 SCRA 256

Facts
Private respondents approached petitioner and asked the latter to extend to them an
accommodation loan. They proposed to pay with interest. They even gave a check,
signed by Tat, drawn against Chinabank, and signed at the back by the private
respondents. They said that they will change the check with cash after one month and
if not, the check could be presented for payment and it would be paid. The loan was
actually extended but when the check was presented for payment, it was dishonored
the account on which it is drawn has long been closed. The trial court held in favor
of petitioner but this was reversed by the appellate court by ruling that the check has
passed through other hands before reaching the petitioner and the said check wasnt
presented within reasonable time and after its issuance.
Held 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 case of a bill of exchange, presentment for
payment is sufficient if made within reasonable time after the last negotiation thereof.
Notice may be given as soon as instrument has been dishonored and unless delay is
excused must be given within the time fixed by law. In this case, presentment and
notice of dishonor were not made within reasonable time. o September 1960date
when the check was drawn o March 1964presented to drawee bank o April 1968
notice of dishonor
PNB v Seeto , 91 Phil 756
The respondent Seeto negotiated a check with the petitioner, PNB. The check is
allegedly drawn by one Yek Kiao against the latters account in the drawee bank,
Philippine Bank of Communications. Seeto then made an unqualified indorsement in
favor of the petitioner. When the check was presented for payment by the petitioner to
the drawee bank, the latter dishonored the same on account that the said account had
insufficient funds. The respondent did not heed the demand of the petitioner for
reimbursement, claiming that the said account had sufficient fund at the time of
negotiation with the petitioner and that had the petitioner not delayed in the checks
presentment, it may have been paid before the funds of the said account was
exhausted. The petitioner filed a suit for collection of sum of money, arguing that the
respondent made a guarantee to it that he would pay the amount thereof in case of
dishonor. The trial court ruled in favor of the petitioner, holding tha the assurances
made by the respondent binded him to pay, and that no delay was incurred by the
petitioner in timely presenting the check for payment on account of the distance
between it office and the drawee bank. On appeal to the Court of Appeals, this court
held that petitioner was guilty of unreasonably retaining and withholding the check,
and that the delay in the presentment for payment was inexcusable, so that respondent
was thereby discharged from liability.
WON the respondents debt was discharged due to delay in presentment by the
petitioner.

(1.)

Yes, the petitioner is guilty of delay. Even though under the NIL sec 84
provides that when the instrument is dishonored by nonpayment, an
immediate right of recourse to all parties secondarily liable thereon accrues
to the holder, its application is subject to the condition imposed by sec
186, to the effect that the check must be presented for payment within a
reasonable time after its issue. 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. (2.) If the indorsers liability
is not discharged due to unreasonable delay in presentment, such then is
contrary to the essential nature and character of negotiable instruments their negotiability. They 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. There is evidence to prove
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. (3.) The allegation of the petitioner as to the alleged assurance
made by Seeto that the latter made himself liable in case of dishonor, such
liability is not substantiated. Under sec 66, liability of drawer, there exist
no guarantees that the latter would be liable even if there is delay in
presentment.
Crystal v CA, 71 SCRA 443

In a case previously decided by the Supreme Court, the petitioner sought to redeem a
particular real estate which was subjected to execution. Herein respondents bought the
property under execution sale. Before the lapse of the prescribed period to redeem the
property, the petitioner Crystal tendered payment to the respondents through a check,
and was consequently granted a deed of redemption. The amount of the check was
however not realized (withdrawn). The private respondents now sought with the trial
court to deem the redemption of the petitioner invalid in as much as the proceeds of
the said check was never realized due to either dishonor or that the account became
stale. The trial court in an earlier order held that question of ownership and the
legality of the deed of redemption cannot be heard in the present action for legal
redemption, and must be threshed out in a separate action. However, the trial court
issued a writ of possession in favor of the respondents, and that such decision was
later affirmed by the CA. The SC earlier ruled in favor of the respondents, until the
present motion for reconsideration was filed.
WON the dishonor of the check causes the redemption invalid // the account in which
the check must be accounted against affect the validity thereof.
(1.)

The SC remanded the case to the trial court. If a check is issued for the
purposes of legal redemption of property under execution is dishonored,
then the redemption is null and void. If the account however became stale
due to the non presentment of the check within a reasonable period, it is
important to determine the circumstances under which the said check was
not presented immediately. (2.) If such non presentment cannot be
attributed to the drawer, then it would bring injustice to the latter if the said

redemption be declared invalid. The determination of the cause why the

amount of the check was not realized is imperative, for if it is without the
fault of the drawer, the rights he acquired as a valid redemptioner will be
prejudiced.
Papa v A.U. Valencia, 284 SCRA 643
Petitioner Papa was the administrator of the Testate Estate of Angel Butte. Petitioner
Papa, acting as attorney-in-fact of Butte, Papa sold to Respondent Pearroyo a parcel
of land located in QC. Such parcel of land, together with other parcels, was
mortgaged by Butte to Assoc. Banking Corp (now Assoc. Citizens Bank) before she
passed away. Butte, however, died before all of the properties were released. Assoc.
Banking Corp. refused to release the subject parcel of land to Respondents until all of
the mortgaged properties of Butte were released. The respondents Valencia and
Pearroyo discovered that the mortgage rights of the bank had been assigned to one
Tomas L. Parpana (now deceased), as special administrator of the Estate of Ramon
Papa, Jr, and that since then, herein petitioner had been collecting monthly rentals
from the tenants of the property, knowing that said property had already been sold to
private respondents. Trial Court allowed the respondents to redeem the property and
an absolute deed of sale be executed in favor of Respondent Pearroyo. NEGO
TOPIC: On appeal to the Court of Appeals, the petitioner alleged that the sale was
never consummated as he did not encash the PCIB check given by respondents in
payment of the full purchase price of the subject lot. He maintained that what said
respondents had actually paid was earnest money. The CA ruled affirmed the decision
of the trial court, holding that there was no evidence that petitioner did not, in fact,
encash said check. On the other hand, respondent testified in court that petitioner Papa
had received the amount of P45,000.00 and issued receipts therefor. According to
respondent court, the presumption is that the check was encashed, especially since the
payment by check was not denied by petitioner and that the check was ith Papa for 10
years. Petitioner appeals to the Supreme Court insisting that he did not encashed the
check, and cited Art. 1249 of the Civil Code, which provides, in part, that payment by
checks shall produce the effect of payment only when they have been cashed or when
through the fault of the creditor they have been impaired.
WON the PCIB check was encashed
YES. The checks were encashed. While it is true that the delivery of a check
produces the effect of payment only when it is cashed, pursuant to Art. 1249 of the
Civil Code, the rule is otherwise if the debtor is prejudiced by the creditors
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. It has, likewise, been held that if no
presentment is made at all, the drawer cannot be held liable irrespective of loss or
injury unless presentment is otherwise excused. The payee of a check would be a
creditor under this provision and if its non-payment is caused by his negligence,
payment will be deemed accomplished and the maker will be discharged of the debt.

International Corporate Bank v Gueco, 351 SCRA 516

Respondents Gueco Spouses obtained a loan from petitioner Union Bank to purchase
a car. In consideration thereof, the Spouses executed promissory notes and a chattel
mortgage over the car to serve as security for the notes. The Spouses defaulted in
payment. Consequently, the Bank filed a civil action for sum of money with prayer for
a Writ of Replevin. The parties however attempted to compromise, whereas the bank
lower the amount due. Gueco delivered a managers check as per the compromise, but
the car was not released because of his refusal to sign the Joint Motion to Dismiss
demanded by the bank. Gueco argued that there is no need to execute a joint motion
for dismissal on account that he hasnt filed his answer yet. Petitioner, however,
insisted that the joint motion to dismiss is standard operating procedure in their bank
as far as compromises are concerned. (Note: Petitioner did not encash the managers
check) Gueco initiated a civil action for damages on account of the banks refusal to
release the mortgaged property despite the payment of the managers check. The
MTC dismissed it for lack of merit. The RTC reversed such decision, holding 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. CA affirmed such decision and held that the
due to the petitioner refusal to release the car despite respondent's tender of payment,
the former intentionally evaded its obligation and thereby became liable for moral and
exemplary damages.
WON the Petitioner was negligent for not encashing the check and therefore the car
should be released and damages should be paid.
(1.)

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 the case at bar,
however, the check involved is not an ordinary bill of exchange but a
managers check. A managers check is one drawn by the banks manager
upon the bank itself. 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. 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. It has been held that, if the
check had become stale, it becomes imperative that the circumstances that
caused its non-presentment be determined. 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. The SC saw no bad faith or negligence in this position
taken by the Bank. SUMMARY: Gueco Spouss obtained loan from bank to
buy a car. Spouses defaulted payment. Bank sued. Upaid amount lowered
as result of some negotiations. Gueco issued managers check. Bank
refused to accept and insisted that Gueco sps. Sign a Joint Motion to
Dismiss. Spouses refused. Car was not released by Bank. Spouses sued
Bank to recover the car and collect damages. Sps allege that the delivery of
managers check is effective as payment. Bank did not encash the check

because of the pending case. Check became stale. Should the bank release
the car and pay damages? NO. The check in this case is a managers check
and it is accepted by issuance. Assuming presentment is needed, failure to
present will discharge drawer to the extent of lost because of delay. If a
check becomes stale, it is impt to look into the circumstance that caused
the non-presentment. In this case, it is because of the pending case. The SC
saw no bad faith or negligence on the part of the Bank.

PNB v CA, 25 SCRA 693

One Augusto Lim deposited in his account at PCIB several GSIS checks, against the
latters account in PNB. The check was sent for clearing with the Central Bank, and
was thenafter sent to PNB. PBN however did not return the said check and paid the
amount thereof to PCIB and debited such amount to the account of GSIS. However,
the PNB recredited the amount to the account of GSIS on account that the said checks
were forged. Consequently, PNB demanded the refund of the amount from PCIB,
which the latter did not heed. The present suit was filed by PNB against PCIB. It was
discovered that the signatures on the GSIS checks, purportedly of the officers of the
latter, were forged. (GSIS >Pulido payee) > Manuel Go > Augusto Lim) It was
discovered that the PCIB stamped the following on the back of the check: "All prior
indorsements and/or Lack of Endorsement Guaranteed"; that, on the same date, the
PCIB sent the check to the PNB, for clearance, through the Central Bank. GSIS
consequently notified PNB beforehand that said check had been lost, and,
accordingly, requested that its payment be stopped. The trial court dismissed the
complaint, and such decision was affirmed by the CA, hence this petition with the SC,
arguing that having the checks cleared constitutes acceptance and that PCIB should
bear the loss due to its negligence in not determining the authenticity of the checks.
WON the act of clearing constitutes acceptance // PCIB is guilty of negligence.
(1.) No, the act of clearing insofar as checks are concerned is not acceptance.
Acceptance is not required for checks, for the same are payable on demand.
Acceptance and payment are distinguished with each other. The former pertains to a
promise to perform an act while the latter is the actual performance of the act.
(2.)

Assuming that PCIB is negligence under these circumstances, the

petitioner is guilty of an even greater degree of negligence. With the
particularity, the PNB had been guilty of a greater degree of negligence,
because it had a previous and formal notice from the GSIS that the check
had been lost, with the request that payment thereof be stopped. The PNB's
negligence was the main or proximate cause for the corresponding loss

NIL 7th WEEK

Metropol Financing v Sambok Motors, 120 SCRA 864
One Villaruel executed a promissory note in favor of Ng Sambok
Sons Motors Co., Ltd for a certain amount, payable in 12 equal
installments. It is provided therein that default in a single
installment payment renders the not due and demandable in its full
amount. Then after, the respondent Sambok Motors Company, a
sister company of Ng Sambok Sons Motors Co., Ltd., being under the
same management, negotiated the note in favor of the petitioner
Metropol Financing. The respondent indorsed the note in favor of
plaintiff with the following indorsement, to wit; Pay to the order of
Metropol Bacolod Financing & Investment Corporation with
recourse; Notice of Demand; Dishonor; Protest; and Presentment
are hereby waived. Subsequently, Villaruel defaulted in payment,
causing the plaintiff to demand full payment thereof. The demand
was unheeded, causing then the respondent to notify the
respondent Sambok that the instrument was dishonored and
thereby making demand for payment. Metropol instituted a case for
collection of sum of money against Sambok. The latter contended
that it cannot be held liable on the note before its co-defendant
Villaruel is declared insolvent. The trial court held in favor of the
petitioner and ordered the respondent to pay the said amount.
Hence, the recourse of Sambok with the SC, contending that it is a
qualified indorser whose liability to the 4 warranties under sec. 65,
hence it cannot be held liable if the person primarily fails to pay. It
further argued that it is a qualified indorser on account of the
qualified indorsement on the note, referring to with recours.
WON the respondent is a qualified indorser.
(1.) No, the respondent is not a qualified indorser, hence he can be
held liable to pay as a person who is secondarily liable thereto. A
qualified indorsement is one which limits the liability of the indorser.
Such may be adduced with the words no recourse/sans recourse.
In the case at bar, the respondent did the opposite and indorsed the
words with recourse, with the corresponding waivers.
(2.) By indorsing the note "with recourse" does not make itself a
qualified indorser but a general indorser who is secondarily liable. A
person secondarily liable as a general indorser undertakes that if
upon presentment the instrument be dishonored, with the necessary
proceedings on dishonor be undertaken, he shall pay the amount
due to the holder.

Lopez v People of the Philippines, 555 SCRA 525

The accused Lopez was charged with the crime of estafa, par. 2(d),
through false pretenses executed simultaneously with fraud. The
accused issued a check in favor of the complainant, knowing for a
fact that the account against which the check will drawn from is
already closed even before the transaction. The trial court convicted
the accused of the crime. The accused now sought recourse from
the CA contending that the complainant payee knew that the
accuseds account was already closed, hence debunking the finding
of deceit. The CA affirmed the lower courts decision, hence the
appeal of the accused with the SC. He now contends with the court
that the trial court erred in not applying the pertinent provisions of
the NIL in the case at bar, such that he is not liable thereon on
account that the payee did not give him a notice of dishonor.
WON the service of notice of dishonor is a controlling element in the
prosecution of estafa.
(1.)No, notice of dishonor is not necessary for the crime of estafa
par 2(d) to be committed.
Under the said provision, estafa is committed through the
following acts, to wit;
(1)the offender has postdated or issued a check in payment
of an obligation contracted at the time of the postdating or
issuance;
(2) at the time of postdating or issuance of said check, the
offender has no funds in the bank or the funds deposited are
not sufficient to cover the amount of the check; and
(3) the payee has been defrauded. 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.
(2.) Under the NIL, sec 114(d) provides that Notice of
dishonor is not needed to be made to the drawer in the
following cases d. where the drawer has no right to expect
or require the drawee to honor the check. The respondent has

no right to require the drawee to honor such on account that

he already knew even before the transaction in issue that his
account with the drawee bank is already closed