Sec. 71 / 186 FACTS:
Spouses Gueco obtained a loan from International Corporate Banik (Union Bank) for the purchase of a car (Nissan Sentra 1600 4DR 19889 Model). As evidence of the loan, they issued a promissory note payable in monthly installments and a chattel mortgage on the car as security for the note. They defaulted in payment of the installments and Union Bank instituted a Civil Case for collection of sum of money with a prayer for a writ of replevin. Spouses Gueco were served summons, after which they had a meeting with the Bank representatives and entered into negotiations for the reduction of their debt.
On Aug. 25, 1995 the Bank agreed to reduce the debt from 184K to 154K and on Aug. 28, 1995 to further reduce it to 150K. On Aug. 29, 1995 Dr. Gueco delivered a manager’s check for 150K to the bank but the car was not released because of his refusal to sign the Joint Motion to Dismiss. Dr.
Gueco argued that the joint motion was unnecessary since he has not yet filed an answer. However, the bank insisted saying that it is a standard operating procedure.
The Spouses Gueco initiated a civil action for damages after several demands and meetings with the bank representatives. The MTC dismissed the case but the RTC reversed the decision. It said that there was a meeting of the minds as to the reduction of the debt but said agreement did not include the signing of a joint motion to dismiss. Hence the car should be returned to the Spouses Gueco immediately and the Bank may deposit the Manager’s check. The court also awarded damages to the Spouses Gueco.
The CA affirmed the decision ISSUES:
1. W/N the signing of the Joint Motion to Dismiss is a condition sine qua non of the compromise agreement
2. W/N the car should be returned without making any provision for the issuance of a new manager’s check by the Spouses Gueco in favor of the Bank in lieu of the original cashier’s check that already became stale
HELD:
1. The signing of the Joint Motion to Dismiss is not a condition sine qua non of the compromise agreement. It has been established and resolved by the trial court that the parties had agreed to the reduction of the loan through an oral compromise agreement made on Aug. 28, 1995 and that the compromise agreement did not include the condition of signing a Joint Motion to Dismiss. The requirement of the Bank that Dr. Gueco sign a Joint Motion to Dismiss only surfaced in Aug. 29, 1995 when he was to make payment of the 150K. There is no need to reverse the ruling of the trial court and the CA on this matter. However the award of damages is deleted as fraud on the part of the Bank was not proven by its insistence that Dr. Gueco sign the Joint Motion to Dismiss.
2. It is not correct to say that the Bank was negligent in opting not to deposit the check and should therefore suffer the loss occasioned by the fact that the original check had become stale.
a. Stale check - a check which is not presented for payment within a reasonable time after its issue. It is valueless and therefore should not be paid. Under the NIL an instrument not payable on demand should be presented for payment on the day it falls due. An instrument payable on demand should be presented within reasonable time after its issue.
In the case of the bill of exchange presentment is sufficient if made within a reasonable time after its issue.
b. Reasonable time – depends on the circumstances of each case.
c. A check must be presented for payment within a reasonable time after its issue. This is because of the nature and theory behind the use of a check points to its immediate use and payability.
d. In the case at bar the check involved is not an ordinary check, but a manager’s check, similar to a cashier’s check, which the manager of the bank draws upon the bank itself. Its issue is equivalent to acceptance. If treated as a promissory note, the drawer is the maker. Holder need not prove presentment for payment or present the bill to the drawee for acceptance. The check becomes the primary obligation of the bank which issues it and constitutes its written promise to pay upon demand.
e. Even if 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 does not wipe out all liability. The Gueco spouses nor the bank upon whom the check was drawn did not suffer damage or loss caused by the delay of presentment. Hence the original obligation to pay the 150K has not been erased.
f. Union Bank held on to the check and refused to encash it because of the controversy surrounding the signing of the joint motion to dismiss. There is no bad faith or negligence in the position taken by the Bank and the Spouses Gueco are ordered to pay 150K.
ANSALDO V. CA 177 SCRA 8 Sec. 74 FACTS:
Transoceanic Factors Corporation (TFC) issued 6 promissory notes signed by its President A.S. Moreno in favor PCIB. The notes were made out in various amounts totaling to 150K.
During the same span of time TFC extended two loans, one for the petitioner Jose Ansaldo for the amount of 28,697.39 and another for Teofilo Reyes for the amount of 26,000.00. The loans were evidenced by negotiable promissory notes wherein Ansaldo and Reyes both (1) waived “demand, presentment, protest and notice of protest and non-payment” and (2) undertook in case of default the payment of damages.
TFC only paid 78K of its total obligation to PCIB. It endorsed Ansaldo’s and Reyes’ promissory notes to PCIB. Despite repeated demands made by PCIB, TFC, Ansaldo and Reyes still failed to pay. PCIB now asks for the enforcement of the notes.
The trial court and the CA ruled in favor of PCIB. Only Ansaldo is appealing the judgment of the CA.
ISSUES:
1. W/N there was a valid assignment of credit by TFC to PCIB
2. W/N Sec. 74 of the NIL was violated by alleged failure of PCIB to present the note for payment to Ansaldo
HELD:
1. There was a valid assignment of credit according to the provisions of articles 1625, 1626 and 1627 of the civil code. Consent of the debtor need not be secured for the credit to be assigned to a third person. Notice is the only requirement of the law. Evidence shows that Ansaldo received the required notice of assignment of credit. It is of no consequence that the notice was given by PCIB and not the assignor TFC. The assignee, PCIB, has a greater interest in notifying the debtor than TFC. It is not necessary that the assignment be evidenced by a public document. The public document is only for the purpose of binding third persons. Ansaldo and Reyes are not third persons.
2. Sec. 74 provides that “the instrument must be exhibited to the person from whom payment is demanded, and when it is paid must be delivered to the party paying it”
a. This is issue was never raised in either the CA or trial court and cannot be raised first time on appeal.
b. If the exhibition was necessary to determine the genuineness of the note, this has already been rendered unnecessary not only by Ansaldo’s own omission to contest the note but also from his admission of the authenticity of the note implicit of his averments that he had made substantial payments thereon (3,011.40 – which were credited by the trial court to him)
c. Also Ansaldo had expressly waived “demand, presentment, protest and notice of protest and non-payment” of the note.
Judgment of CA affirmed.
PHILIPPINE NATIONAL BANK v. SEETO 91 Phil 757
Sec. 84 / 186
FACTS:
Benito Seeto called Philippine National Bank (PNB) Surigao and presented a check worth P5,000 dated at Cebu on March 10, 1948, payable to cash or bearer and drawn by Gan Yek Kiao against Philippine Bank of Communications (PBC) Cebu.
Seeto made a general and unqualified indorsement of the check to PNB. PNB Surigao accepted and paid Seeto P5,000.
The check was made to PNB Cebu on March 20 and presented to PBC for payment on April 9. The check was dishonored for insufficient funds.
Check was returned to PNB Surigao and PNB demanded immediate refund from Seeto.
Seeto asked PNB to delay the filing of the suit so he could inquire as to why the check was dishonored. Thereafter, Seeto refused to refund saying that the drawer had sufficient funds at the time the check was issued and that PNB delayed in forwarding the check to PBC until the funds of Gan Yek Kiao were exhausted. Had it not delayed, it would have been paid.
Trial court ruled in favor of PNB saying that Seeto undertook to refund in case of dishonor and that this assurance was what motivated PNB (testified by witnesses) to pay the check and that there was no unreasonable delay in forwarding the check for payment
CA reversed. There is delay, parol evidence is incompetent and an indorser is merely a surety or guarantor
ISSUE:
Whether or not Seeto is liable HELD:
No, Seeto is not liable.
Sections 143 and 144 of the Negotiable Intstruments Law are not applicable because these provisions refer to presentation of bills of exchange and not to checks. In checks, presentment for acceptance is not required.
Section 84 s the applicable provision. Section 84 says that when an instrument is dishonored an immediate right of recourse is given to the holder against the persons secondarily liable such as an indorser
Applicability of Section 84 is subject to Section 186 which provides that presentment must be made within a reasonable time after issuen otherwise the drawer will be discharged from liability thereon to the extent of the loss caused by the delay.
The silence of Section 1861 as to the indorser is due to the fact that his discharge is already expressly covered by Section 84, the indorser being a person secondarily liable on the instrument.
The reason for the difference between the liability of the indorser and that of the drawer is not probably or necessarily prejudiced thereby, while an indorser is actually or by legally presumed to be prejudiced. (US Case: only when there is proof that the indorser knew that when he cashed the check that there would be no funds in the bank to meet it can the rule be avoided)
The fact that checks of the drawer subsequent to March 13, 1948, drawn against the same bank and cashed at the same Surigao agency, were not dishonored positively shows 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, PNB would have been able to receive payment.
We find no reason for disturbing the conclusion of the CA that there was unreasonable delay in the presentation of the check for payment at the drawee bank, and that as a consequence thereof, the indorser (Seeto) was thereby discharged.
Negotiable instruments – character of negotiability must be passed on with promptness
Even if there were assurances made by Seeto to refund the check, the assurances are the ordinary obligations of an indorser which are considered discharged by the unreasonable delay in presentation of the check for payment
1 Sec. 186.—Within what time a check must be presented.—A check must
be presented for payment within a reasonable time after issue or the drawer will be discharged from liability thereon to the extent of the loss caused by the delay.
ASIA BANKING CORPORATION v. JAVIER 44 Phil 777
Sec. 89
FACTS:
On May 10, 1920, Salvador Chaves drew a check on PNB worth P11,000 in favor of La Insular.
Limited partners of La Insular indorsed the check and then deposited by Chaves in his current account with Asia Banking Corporation on July 14.
On June 25, Chaves drew another check worth P18,000++ on PNB in favor of La Insular; again indorsed by limited partners and again deposited by Chaves in Asia Banking on July 6.
Amounts in both checks were used by Chaves after deposit by drawing checks against Asia Banking.
Checks were presented by Asia Banking to PNB for payment but PNB refused to pay (no funds).
Lower court ruled in favor of Asia Banking. ISSUE:
Whether or nor liability of Javier as indorser was extinguished HELD:
Yes, liability of Javier was extinguished.
We may say in connection with this assignment of error that the liability of Javier never arose.
According to Section 89, indorsers are not liable unless they are notified that the document was dishonored.
It will be incumbent upon plaintiff, who seeks to enforce defendant’s liability upon the checks as indorser, to establish said liability by proving that notice was given to Javier within the time, and in the manner, required by the law that the checks in question had been dishonored.
There is no proof in the record tending to show that plaintiff gave any notice whatsoever to the defendant that the checks in question had been dishonored, and therefore it had not established a cause of action.
FIRESTONE TIRE & RUBBER CO V. CA AND LUZON DEVELOPMENT BANK.
353 SCRA 601