Negotiable Instruments Law Cases VIII Presentment for Payment/ Acceptance Prudential Bank v IAC G.R. No. 74886.

December 8, 1992 Facts On August 8, 1962, defendant-appellant Philippine Rayon Mills, Inc. entered into a contract with Nissho Co., Ltd. of Japan for the importation of textile machineries. To effect payment for said machineries, the defendant-appellant applied for a commercial letter of credit with the Prudential Bank and Trust Company in favor of Nissho. By virtue of said application, the Prudential Bank opened Letter of Credit. Against this letter of credit, drafts were drawn and issued by Nissho (Exhibits X, X-1 to X-11, Ibid., pp. 65, 66 to 76), which were all paid by the Prudential Bank through its correspondent in Japan, the Bank of Tokyo, Ltd. As indicated on their faces, two of these drafts (Exhibits X and X-1, Ibid., pp. 65-66) were accepted by the defendantappellant through its president, Anacleto R. Chi, while the others were not (Exhibits X-2 to X-11, Ibid., pp. 66 to 76). To enable the defendant-appellant to take delivery of the machineries, it executed, by prior arrangement with the Prudential Bank, a trust receipt which was signed by Anacleto R. Chi in his capacity as President (sic) of defendant-appellant company. The defendantappellant was able to take delivery of the textile machineries and installed the same at its factory site at 69 Obudan Street, Quezon City. Sometime in 1967, the defendant-appellant ceased business operation. The obligation of the defendant-appellant arising from the letter of credit and the trust receipt remained unpaid and unliquidated. Issue Whether presentment for acceptance of the drafts was indispensable to make Philippine Rayon liable thereon. Held Paragraph 8 of the Trust Receipt which reads: My/our liability for payment at maturity of any accepted draft, bill of exchange or indebtedness shall not be extinguished or modified does not, contrary to the holding of the public respondent, contemplate prior acceptance by Philippine Rayon, but by the petitioner. Acceptance, however, was not even necessary in the first place because the drafts which were eventually issued were sight drafts. And even if these were not sight drafts, thereby necessitating acceptance, it would be the petitionerand not Philippine Rayonwhich had to accept the same for the latter was not the drawee. Presentment for acceptance is defined as the production of a bill of exchange to a drawee for acceptance. The trial court and the public respondent, therefore, erred in ruling that presentment for acceptance was an indispensable requisite for Philippine Rayons liability on the drafts to attach. Contrary to both courts pronouncements, Philippine Rayon immediately became liable thereon upon petitioners payment thereof. Such is the essence of the letter of credit issued by the petitioner. Wong v CA G.R. No. 117857. February 2, 2001. Facts Petitioner Wong was an agent of Limtong Press, Inc. (LPI), a manufacturer of calendars. LPI would print sample calendars, then give them to agents to present to customers. the agents would come around to

collect the payments. Petitioner, however, had a history of unremitted collections, which he duly acknowledged in a confirmation receipt he co-signed with his wife. Hence, petitioners customers were required to issue postdated checks before LPI would accept their purchase orders. These checks were initially intended to guarantee the calendar orders of customers who failed to issue post-dated checks. However, following company policy, LPI refused to accept the checks as guarantees. Instead, the parties agreed to apply the checks to the payment of petitioners unremitted collections for 1984 amounting to P18,077.07. LPI waived the P52.07 difference. Hence, on June 5, 1986, LPI deposited the checks with Rizal Commercial Banking Corporation (RCBC). The checks were returned for the reason account closed. On November 6, 1987, petitioner was charged with three (3) counts of violation of B.P. Blg. 22 under three separate Informations for the three checks amounting to P5,500.00, P3,375.00, and P6,410.00. Peitioner was convicted by the trial court and court of appeals. Petitioner avers that since the complainant deposited the checks on June 5, 1986, or 157 days after the December 30, 1985 maturity date, the presumption of knowledge of lack of funds under Section 2 of B.P. Blg. 22 should not apply to him. He further claims that he should not be expected to keep his bank account active and funded beyond the ninety-day period Issue won petitioner is guilty of violation of BP 22. Held That the check must be deposited within ninety (90) days is simply one of the conditions for the prima facie presumption of knowledge of lack of funds to arise. It is not an element of the offense. Neither does it discharge petitioner from his duty to maintain sufficient funds in the account within a reasonable time thereof. Under Section 186 of the Negotiable Instruments Law, 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. By current banking practice, a check becomes stale after more than six (6) months, or 180 days. Private respondent herein deposited the checks 157 days after the date of the check. Hence, said checks cannot be considered stale. Only the presumption of knowledge of insufficiency of funds was lost, but such knowledge could still be proven by direct or circumstantial evidence. There is, on record, sufficient evidence that petitioner had knowledge of the insufficiency of his funds in or credit with the drawee bank at the time of issuance of the checks. And despite petitioners insistent plea of innocence, we find no error in the respondent courts affirmance of his conviction by the trial court for violations of the Bouncing Checks Law. International Corporate Bank vs. Gueco G.R. No. 141968. February 12, 2001. Facts The respondents Gueco Spouses obtained a loan from petitioner International Corporate Bank (now Union Bank of the Philippines) to purchase a car. 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. However, as a result of the non-payment of the reduced amount on that date, the car was detained inside the banks compound. On August 29, 1995, Dr. Gueco delivered a managers 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. Gueco spouses initiated a civil action for damages. The Metropolitan Trial Court dismissed the complaint for lack of merit. On appeal to the Regional Trial Court, Branch 227 of Quezon City, the decision of the Metropolitan Trial Court was reversed. Court of Appeals affirmed MTC.

Issue THE COURT OF APPEALS ERRED IN HOLDING THAT THE PETITIONER RETURN THE SUBJECT CAR TO THE RESPONDENTS, WITHOUT MAKING ANY PROVISION FOR THE ISSUANCE OF THE NEW MANAGERS/CASHIERS CHECK BY THE RESPONDENTS IN FAVOR OF THE PETITIONER IN LIEU OF THE ORIGINAL CASHIERS CHECK THAT ALREADY BECAME STALE. Held Respondents would make us hold that petitioner should return the car or its value and that the latter, because of its own negligence, should suffer the loss occasioned by the fact that the check had become stale. It is their position that delivery of the managers check produced the effect of payment and, thus, petitioner was negligent in opting not to deposit or use said check. Rudimentary sense of justice and fair play would not countenance respondents position. 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. 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. It is similar to a cashiers check both as to effect and use. 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 managers 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 nonpresentment 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. We see no bad faith or negligence in this position taken by the Bank IX Checks State Investment House, Inc. vs. Court of Appeals Facts Private respondent Nora B. Moulic issued to Corazon Victori-ano, as security for pieces of jewelry to be sold on commission, two (2) post-dated Equitable Banking Corporation checks in the amount of Fifty Thousand Pesos (P50,000.00) each, one dated 30 August 1979 and the other, 30 September 1979. Thereafter, the payee negotiated the checks to petitioner State Investment House, Inc. (STATE). MOULIC failed to sell the pieces of jewelry, so she returned them to the payee before maturity of the checks. The checks, however, could no longer be retrieved as they had already been negotiated. Consequently, before their maturity dates, MOULIC withdrew her funds from the drawee bank. Upon presentment for payment, the checks were dishonored for insufficiency of funds. On 20 December 1979, STATE allegedly notified MOULIC of the dishonor of the checks and requested that it be paid in cash instead, although MOULIC avers that no such notice was given her. Issue

won the drawer of check issued ti another merely as security is liable to a holder in due course Held a prima facie presumption exists that the holder of a negotiable instrument is a holder in due course. Consequently, the burden of proving that STATE is not a holder in due course lies in the person who disputes the presumption. In this regard, MOULIC failed. Consequently, STATE is indeed a holder in due course. As such, it holds the instruments free from any defect of title of prior parties, and from defenses available to prior parties among themselves; STATE may, therefore, enforce full payment of the checks. MOULIC cannot set up against STATE the defense that there was failure or absence of consideration. MOULIC can only invoke this defense against STATE if it was privy to the purpose for which they were issued and therefore is not a holder in due course. Moreover, the fact that STATE failed to give Notice of Dis-honor to MOULIC is of no moment. The need for such notice is not absolute; there are exceptions under Sec. 114 of the Negotiable Instruments Law. Under the facts of this case, STATE could not expect payment as MOULIC left no funds with the drawee bank to meet her obligation on the checks, so that Notice of Dishonor would be futile. Bataan Cigar and Cigarette Factory, Inc. vs. Court of Appeals G.R. No. 93048. March 3, 1994. Facts Petitioner, Bataan Cigar and Cigarette Factory, Inc. (BCCFI), a corporation involved in the manufacturing of cigarettes, engaged one of its suppliers, King Tim Pua George (hereinafter referred to as George King), to deliver 2,000 bales of tobacco leaf starting October 1978. In consideration thereof, BCCFI, on July 13, 1978 issued crossed checks post dated sometime in March 1979 in the total amount of P820,000.00. Again petitioner issued postdated crossed checks in the total amount of P1,100,000.00, payable sometime in September 1979. On July 19, 1978, he sold at a discount check TCBT 551826 bearing an amount of P164,000.00, post dated March 31, 1979, drawn by petitioner, naming George King as payee to SIHI. On December 19 and 26, 1978, he again sold to respondent checks TCBT Nos. 608967 & 608968, both in the amount of P100,000.00, post dated September 15 & 30, 1979 respectively, drawn by petitioner in favor of George King. In as much as George King failed to deliver the bales of tobacco leaf as agreed despite petitioners demand, BCCFI issued on March 30, 1979, a stop payment order on all checks payable to George King. Efforts of SIHI to collect from BCCFI having failed, it instituted the present case, naming only BCCFI as party defendant. Issue whether SIHI, a second indorser, and holder of crossed checks, is a holder in due course, to be able to collect from the drawer, BCCFI. Held Section 59 of the NIL further states that every holder is deemed prima facie a holder in due course. However, when it is shown that the title of any person who has negotiated the instrument was defective, the burden is on the holder to prove that he or some person under whom he claims, acquired the title as holder in due course. In order to preserve the credit worthiness of checks, jurisprudence has pronounced that crossing of a check should have the following effects: (a) the check may not be encashed but only deposited in the bank; (b) the check may be negotiated only onceto one who has an account with a bank; (c) and the act of crossing the check serves as warning to the holder that the check has been issued for a definite purpose so that he must inquire if he has received the check pursuant to that purpose, otherwise, he is not a holder in due course. In the present case, BCCFIs defense in stopping payment is as good to SIHI as it is to George King. Because, really, the checks were issued with the intention that George King

would supply BCCFI with the bales of tobacco leaf. There being failure of consideration, SIHI is not a holder in due course. Consequently, BCCFI cannot be obliged to pay the checks. The foregoing does not mean, however, that respondent could not recover from the checks. The only disadvantage of a holder who is not a holder in due course is that the instrument is subject to defenses as if it were non-negotiable. Hence, respondent can collect from the immediate indorser, in this case, George King. Citytrust Banking Corp. vs. Intermediate Appellate Court G.R. No. 84281. May 27, 1994. Facts In her complaint, private respondent averred that she, a businesswoman, made regular deposits, starting September of 1979, with petitioner Citytrust Banking Corporation at its Burgos branch in Calamba, Laguna. On 15 May 1980, she deposited with petitioner the amount of Thirty One Thousand Five Hundred Pesos (P31,500.00), in cash, in order to amply cover six (6) postdated checks she issued. When presented for encashment upon maturity, all the checks were dishonored due to insufficient funds. The last check No. 007400, however, was personally redeemed by private respondent in cash before it could be redeposited. Petitioner, in its answer, asserted that it was due to private respondents fault that her checks were dishonored. It averred that instead of stating her correct account number, i.e., 29000823, in her deposit slip, she inaccurately wrote 2900823. Issue won petitioner is liable for damages Held We cannot uphold the position of defendant. For, even if it be true that there was error on the part of the plaintiff in omitting a zero in her account number, yet, it is a fact that her name, Emme E. Herrero, is clearly written on said deposit slip (Exh. B). This is controlling in determining in whose account the deposit is made or should be posted. This is so because it is not likely to commit an error in ones name than merely relying on numbers which are difficult to remember, especially a number with eight (8) digits as the account numbers of defendants depositors. We view the use of numbers as simply for the convenience of the bank but was never intended to disregard the real name of its depositors. The bank is engaged in business impressed with public interest, and it is its duty to protect in return its many clients and depositors who transact business with it. It should not be a matter of the bank alone receiving deposits, lending out money and collecting interests. It is also its obligation to see to it that all funds invested with it are properly accounted for and duly posted in its ledgers. Tan vs. Court of Appeals G.R. No. 108555. December 20, 1994. Facts Petitioner Ramon Tan, a trader-businessman and community leader in Puerto Princesa, had maintained since 1976 Current Account No. 109058068 with respondent banks Binondo branch. On March 11, 1988, to avoid carrying cash while enroute to Manila, he secured a Cashiers Check No. L 406000126 from the Philippine Commercial Industrial Bank (PCIB), Puerto Princesa branch, in the amount of Thirty Thousand (P30,000.00) Pesos, payable to his order. He deposited the check in his account with RCBC Binondo on March 15. On the same day, RCBC erroneously sent the same cashiers check for clearing to the Central Bank which was returned for having been missent or misrouted.The next day, March 16, RCBC debited the amount covered by the same cashiers check from the account of the petitioner. Respondent bank at this time had not informed the petitioner of its action which the latter claims he

learned of only 42 days after, specifically on March 16, when he received the banks debit memo. petitioner issued two (2) personal checks both dated March 18. Petitioner, alleging to have suffered humiliation and loss of face in the business sector due to the bounced checks, filed a complaint against RCBC for damages in the Regional Trial Court Issue won RCBC is liable for damages Held A bank cannot exculpate itself from liability for the consequences of the use of wrong deposit slip resulting in the misrouting of a regional check to the Central Bank for clearing. The bank is not expected to be infallible but it must bear the blame for not discovering the mistake of its teller despite the established procedure requiring the papers and bank books to pass through a battery of bank personnel whose duty it is to check and countercheck them for possible errors. There is an element of certainty or assurance in an ordinary check that it will be paid upon presentation that is why it is perceived as a convenient substitute for currency in commercial and financial transactions.A cashiers check is a primary obligation of the issuing bank and accepted in advance by its mere issuance, and, by its peculiar character and general use in the commercial world is regarded substantially to be as good as the money which it represents. All these considered, petitioners reliance on the laymans perception that a cashiers check is as good as cash is not entirely misplaced, as it is rooted in practice, tradition, and principle. Papa vs. A.U. Valencia and Co., Inc. G.R. No. 105188. January 23, 1998. Facts The complaint alleged that on 15 June 1973, petitioner Myron C. Papa, acting as attorney-in-fact of Angela M. Butte, sold to respondent Pearroyo, through respondent Valencia, a parcel of land. respondents Valencia and Pearroyo filed a complaint for specific performance, praying that petitioner be ordered to deliver to respondent Pearroyo the title to the subject property. the trial court rendered a decision Ordering defendant to execute a Deed of Absolute Sale in favor of plaintiff Felix Pearroyo covering the property in question and to deliver peaceful possession and enjoyment of the said property to the said plaintiff, free from any liens and encumbrances. Petitioner appealed the aforesaid decision of the trial court to the Court of Appeals, alleging among others that the sale was never consummated as he did not encash the check (in the amount of P40,000.00) given by respondents Valencia and Pearroyo in payment of the full purchase price of the subject lot. He maintained that what said respondents had actually paid was only the amount of P5,000.00 (in cash) as earnest money. Issue won the contention of petitioner is meritorious held We find no merit in petitioners arguments. It is an undisputed fact that respondents Valencia and Pearroyo had given petitioner Myron C. Papa the amounts of Five Thousand Pesos (P5,000.00) in cash on 24 May 1973, and Forty Thousand Pesos (P40,000.00) in check on 15 June 1973, in payment of the purchase price of the subject lot. Petitioner himself admits having received said amounts, and having issued receipts therefor. Petitioners assertion that he never encashed the aforesaid check is not substantiated and is at odds with his statement in his answer that he can no longer recall the transaction which is supposed to have happened 10 years ago. 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. As already stated, he even waived the presentation of oral evidence. Granting that petitioner 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. 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