#1 Far East Realty vs.

CA
Facts:
Dy Hiat Tat, Gaw Suy, and Siy Chee (RESPONDENTS)
approached Far East Realty Investment (FERI) in its
office to ask for an accommodation loan of Php4500.
On September 13, 1960, respondents issued a
Php4500 China Bank check to be paid after one month
to repay the loan.March 5, 1964 the check was
presented to China Bank but it bounced because the
account was already closed. FERI made multiple
demands but failed to collect. Hence, they filed a case
in the RTC to collect the Php4500.
Respondents defense:
1) They never asked for a loan from FERI. As can be seen from the
endorsements at the back of the check, it wasnt directly delivered to FERI
and that the check passed through other hands since they issued the
check for other purposes (Tat: to pay their grocery bills from Sin Chin Juat
Grocery; Gaw Suy An, who endorsed the check for his principal, Victory
Hardware, this check was delivered to the Asian Surety & Insurance Co.,
Inc., to be applied to the indebtedness of the Victory Hardware with said
Insurance Company). It wasnt, as FERI claims, a security for their loan.
Hence, respondents invoke the defense of lack of consideration for the
check against FERI.

2) There is unreasonable delay in the presentment of

the check (dated sep 13 1960, only encashed march 5,
1964) hence, they are absolved from liability.
FERI:
1) Presentment and notice is not necessary when such
would be useless anyway. It was seen that the account

was closed. Hence, the conduct of the drawer shows

that he would have expected that the check would not
have been honoured anyway hence, the presentment
was unnecessary
2) If there was delay, the drawer/endorsers are not absolved from liability,
but only to the extent of the damage they suffered by reason of the delay.
And in this case, respondents didnt show any proof of damage suffered
therefore they are still liable for the entire amount.

Issue:
1. W/n presentment for payment can be dispensed
with
2. w/n presentment for payment and notice of
dishonor was made within reasonable time?
HELD:
1. No. Where the instrument is not payable on
demand (fixed date), 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).
2. There is unreasonable delay. Respondents are NOT
liable to pay
In the case at bar, it is obvious that notice and

presentment were not made within reasonable time

Check was issued September 13, 1960 but only

presented March 5, 1964
After dishonour by the bank, formal notice of
dishonour to the respondents was only made April 27,
1968 FERI undoubtedly failed to exercise prudence
and diligence as required by law. Also, he presented
no justification for the unreasonable delay.

#2 PNB vs. Seeto

Facts:
Parties: Gan Yek Kiao (drawer) drew a check in the
amount of P5,000.00 payable to cash or to bearer. ;
PNB, Cebu branch (drawee bank); check was
delivered to Benito Seeto (indorser) who subsequently
presented the check to PNB, Surigao branch
(indorsee/payee) and delivered it with general and
unqualified indorsement. PNB Surigao gave Seeto the
amount of the check. The check was mailed to Cebue
branch but later dishonored for insufficiency of funds.
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, that at the time of negotiation, respondent had
sufficient funds. Respondent invokes: sec. 84 holder
has immediate recourse to all parties secondary liable
if dishonored for non-payment.

Issue: W/n PNB Surigao is correct in applying sec 84?

Held: yes, however it must be read in consonance
with sec 186 which states that check must be
presented within a reasonable time after its issuance.
Unreasonable delay of PNB in the presentment of the
check discharges Seeto (indorser) of his secondary
liability. 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.
The silence of Section 186 as to the indorser is due to
the fact that his discharge is already expressly
covered by the provision of 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 in case of
dishonor is that the drawer is not probably or
necessarily prejudiced thereby, while an indorser is,
actually or by legal presumption.
There is unreasonable delay in this case: Check is
dated march 10, cashed by PNB Surigao on march 13.
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.

#3 Crystal vs. CA
Facts:
Civil case (Ocang vs. Montayre) instituted in Cebu
pertaining the estate of Nicholas Rafols. After the
decision had been final and executory Court sold 4 to
5 parcels of land through a public auction to Ocang
(10,000). In 1958, heirs assigned their right of
redemption to crystal. By virtue of this, he deposited
11,200 with the provincial sheriff of cebu and took
possession of the lands and cultivated the same.
Crystal was dispossessed by former owner Ocang,
who justified her actions by alleging that the
redemption was void due to the check allegedly
being dishonored due to lack of sufficient funds
or being stale.

Issue: w/n conflicting circumstances of the check

being dishonored and becoming stale affect the
validity of the redemption sale
Held:
For a check to be dishonored upon presentment and
to be stale for not being presented at all in time are
incompatible
developments
that have
variant
legal consequences. If
indeed
the questioned check
was
dishonored,
the

redemption was null and void. If it had only

become stale, it becomes imperative that the
circumstances that caused its non-presentment be
determined, for if it was not due to the fault of the
drawer, it would be unfair to deprive him of the rights
he had acquired as redemptioner. Herein, it appears
that there is a strong showing that the check was not
dishonored, although it became stale, and that Pelagia
Ocang had actually been paid the full value thereof.
The Supreme Court, thus, reconsidered its decision
and remanded the case to the trial court for further
proceedings.
#4 Papa vs. Valencia
Facts:
Myron Papa is the administrator of the estate of
Angela Butte. In 1973, 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. However, Papa was not able to deliver
the certificate of title to Pearroyo because the said
land was mortagaged with Associated Citizens Bank.
A litigation ensued and ten years after, respondents
filed a suit for specific action. Trial court ruled in
favor of respondents. Papa appealed. 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.

Issue:
w/n the check was encashed and can be considered
effective as payment
Held:
Yes
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 (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.
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.
#5 International Corporate Bank vs. Spouses
Guico
Facts:

Spouses obtained a loan from ICB (now Union Bank)

to purchase a car (Nissan Sentra 1600 4DR 1989). In
consideration, the spouses executed Prom. Notes
which were payable in installments and chattel
mortgage over the car. However, the spouses
defaulted in payment of their obligations despite
lowering of the amount to be paid from 184,000 to
150,000. The car was detained by the bank.
Thereafter, Dr. Gueco delivered a managers check
worth 150,000 however the bank refused to deliver
the car to spouses Gueco for failure to sign a Joint
Motion to Dismiss (to preclude filing of other claims).
Spouses Gueco filed an action for damages. During
the pendency, the check had become stale at the
hands of the bank.
Issue: w/n the bank is negligent in not using 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.
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.
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.

Indeed, the circumstances that caused the nonpresentment 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.
#6 PNB vs. CA and PCIB
Facts:
Jan. 15, 1962, Augusto Lim deposited in his current
account with PCIB a Check from GSIS for P57, 415. It
was drawn against PNB.
Following an established banking practice in the
Philippines, the check was, on the same date,
forwarded, for clearing, through the Central Bank, to
the PNB, which did not return said check the next day,
or at any other time.
PNB paid PCIB. It then debited the account of GSIS.
GSIS demanded that PNB re-credit its account, as the
signatures of its (GSISs) officers were forged.
PNB re-credited GSIS. Sought repayment from PCIB.
PCIB refused. Hence this action.
Ultimately, PNB loses. Because:

Doctrine:

o As against the drawee, indorsement by intermediate

bank does not guarantee signature of drawer
o The stamp on the back, guarantying all prior
indorsements, only refers to indorsements
o Most importantly, regardless of negligence on
PCIBs part, if any, PNB is the more negligent one,

since it received a report on the lost check already

beforehand. Also, following regular banking practice,
since it kept the check after it was given by PCIB, it
signified regularity in the check, making PCIB believe
that it was safe to pay Lim for the check. PNB was
thus proximate cause of loss.