Luis Wong VS Court of Appeals and People of the PhilippinesG.R. No.117857

February 2, 2001

FACTS: Petitioner Wong was an agent of Limtong Press. Inc. (LPI), a manufacturer of

calendars. After printing the calendars, LPI would ship the calendars directly to the customers. Thereafter, the agents would come around to collect the payments. Petitioner, however, had a history of unremitted collections. Hence, petitioner’s customers were required to issue post-dated checks before LPI would accept their purchase orders.In early December 1985, Wong issued six (6) postdated checks totaling P18,025.00, 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 petitioner’s unremitted collections.  Before the maturity of the checks, petitioner prevailed upon LPI not to deposit the checks and promised to replace them within 30 days. However, petitioner reneged on his promise. Hence, on June 5, 1986, LPI deposited the checks with Rizal Commercial Banking Corporation (RCBC). The checks were returned for the reason "account closed." Petitioner failed to make arrangements for payment within five (5) banking days. Petitioner was charged with three (3) counts of violation of B.P. Blg.22 and was found guilty by the trial court, to which the CA affirmed.

Issue:Whether or not LPI deposited the checks within a reasonable time.

Held:Yes. 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. 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. As found by the trial court, private respondent did not deposit the checks because of the reassurance of petitioner that he would issue new checks. Upon his failure to do so, LPI was constrained to deposit the said checks. After the checks were dishonored, petitioner was duly notified of such fact but failed to make arrangements for full payment within five (5) banking days thereof. 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.

The International Corporate Bank vs. Spouses Gueco,G.R. No. 141968

February 12, 2001

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. As the usual story goes, the spouses defaulted in payment of their obligations and despite the lowering of the amount to be paid they still failed to pay. Thereafter, they tendered a manager’s check in favor of the bank. Nonetheless, 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:Whether or not the signing of the joint motion to dismiss a part of the compromise

agreement between the spouses and the bank.

HELD:No, it is not a part of the compromise agreement entered by the parties. And thus,

the signing is dispensable in releasing the car to the spouses. And on the ancillary issue of the case, which is the relevant issue for the subject, whether or not the spouses should replace the check they paid to the bank after it became stale, the answer is yes. It appeared that the check has not been en cashed. The delivery of the manager’s 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 en cash 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.

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 manager’s check, which is essentially a bank’s 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 delay but here there is no loss sustained. Still, such failure to present on time does not wipe out liability

Far East Realty, Inc. vs Court of AppealsG.R. No. L-36549 October 5, 1988

Facts:Private respondents asked the petitioner to extend an accommodation loan in the

sum of P4,500.00. 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. The aforesaid check was presented for payment to the China Banking Corporation, but said check bounced and was not cashed by said bank, for the reason that the current account of the drawer thereof had already been closed. Petitioner demanded payment from the private 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.The Lower Court ruled in favor of the petitioner. However, this was reversed by the CA upon appeal by the respondents, ruling 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. 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.

Issues:1. Whether or not presentment for payment can be dispensed with2. Whether or not presentment for payment and notice of dishonor of the

questioned check were made within reasonable timeHeld:

1. 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).

2. 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. 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.

Violet McGuire vs Province of SamarG.R. No. L-8155

October 23, 1956

FACTS:  In May 1942, the Province of Samar during the Japanese Occupation issued a check drawn against Philippine National Bank in favor of Santos worth 25000 pesos. The check was negotiated to a certain James Maguire who then negotiated it to Violet Maguire Sumacad. After the liberation, the said check was presented for payment to the Municipal Treasurer who merely noted it but no actual payment was made. Philippine National Bank required Maguire to present photo static copies of the check as well as a certification from the provincial treasurer. Before the certification, the Province of Samar withdrew the money from their account and left only 740 pesos. Sumacad filed a suit for collection.

ISSUE:  Whether or not Philippine National Bank is liable for the value of the check?

HELD:  YES. Although Philippine National Bank can’t be compelled to pay the check due to lack of certification, Philippine National Bank should be held subsidiarity liable due to its implied acceptance of the check by requiring Maguire to present photo static copies of the check as well as certification from the provincial treasurer. By asking for such requirements, Philippine National Bank was implicitly accepting the check provided that Maguire produce the said documents.

Asia Banking Corporation vs Juan JavierG.R. No. 19051April 4, 1923

Facts:Salvador B. Chaves drew a check on the Philippine National Bank for P11, 000 in

favor of La Insular. This check was indorsed by the limited partners of La Insular, and then deposited by Salvador B. Chaves in his current account with the plaintiff, Asia Banking Corporation. Another check was drawn and deposited in similar fashion. Salvador Chaves used the amount represented by both checks after they were deposited in the plaintiff bank, by drawing checks on the plaintiff. Subsequently the plaintiff presented these checks to the Philippine National Bank for payment, but the latter refused to pay on the ground that the drawer, Salvador B. Chaves, had no funds therein. The lower court sentenced the defendant, as indorser, to pay the plaintiff P11, 000. From this judgment the defendant appealed.

Issue:Whether or not the defendant’s liability as an indorser is extinguished for lack of

notice

Held: Yes. Section 89 of the Negotiable Instruments Law (Act No. 2031) provides that,

when a negotiable instrument is dishonored for non-acceptance or non-payment, notice thereof must be given to the drawer and each of the indorsers, and those who are not notified shall be discharged from liability, except where this act provides otherwise. According to this, the indorsers are not liable unless they are notified that the document was dishonored. Then, under the general principle of the law of procedure, it will be incumbent upon the plaintiff, who seeks to enforce the defendant’s liability upon these checks as indorser, to establish said liability by proving that notice was given to the defendant within the time, and in the manner, required by the law that the checks in question had been dishonored. If these facts are not proven, the plaintiff has not sufficiently established the defendant’s liability. 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 there it has not established its cause of action.

Paulino Gullas vs. The Philippine National BankG.R. No. 43191

November 13, 1935

FACTS:On August 2, 1933, the Treasurer of the United States for the United States Veterans

Bureau issued a Warrant in the amount of $361, payable to the order of Francisco Sabectoria Bacos. Paulino Gullas and Pedro Lopez signed as endorsers of this check. Thereupon the Philippine National Bank cashed it. Subsequently the Insular Treasurer dishonored the treasury warrant. At that time the outstanding balance of Attorney Gullas on the books of the bank was P509. Against this balance he had issued certain checks, which could not be paid when the money was sequestered by the On August 20, 1933, Attorney Gullas left his residence for

The bank on learning of the dishonor of the treasury warrant sent notices by mail to Mr. Gullas, which could not be delivered to him at that time because he was in Manila. In the bank's letter of August 21, 1933, addressed to Messrs. Paulino Gulla and Pedro Lopez, they were informed that the United States Treasury warrant No. 20175 in the name of Francisco Sabectoria Bacos for $361 or P722, the payment for which had been received has been returned by our Manila office with the notation that the payment of his check has been stopped by the Insular Treasurer. "In view of this, therefore, we have applied the outstanding balances of your current accounts with us to the part payment of the foregoing check,” namely, Mr. Paulino Gullas P509. On the return of Attorney Gullas to Cebu on August 31, 1933, notice of dishonor was received and he immediately paid the unpaid balance of the United States Treasury warrant.

ISSUE: Whether or not the bank had the right to automatically credit Gullas account and it

was not prejudicial to him

HELD: NO. It has been held a long line of authorities that notice of dishonor is in order to

charge all indorser and that the right of action against him does not accrue until the notice is given. As a General rule, a bank has a right of set off of the deposits in its hands for the payment of any indebtedness to it on the part of a depositor. However this may be, as to an indorser the situation is different, and notice should actually have been given him in order that he might protect his interests.

NYCO Sales Corporation vs. BA Finance CorporationG.R. No. 71694

August 16, 1991

FACTS:Nyco Sales has discounting privileges with BA Finance. In 1978, brothers Renato

Fernandez and Santiago Renato (officers of Sanshell Corporation) approached Nyco Sales Corporation for a credit accommodation in order for the brothers make use of Nyco’s discounting privileges. Nyco Sales agreed and so on November 15, 1978, Sanshell issued a post-dated (November 17, 1978) BPI check to Nyco Sales in the amount of P60, 000.00. Following the discounting process agreed upon, Nyco Sales, thru its president Rufino Yao, endorsed the check in favor of BA Finance. Thereafter, BA Finance issued a check payable to Nyco Sales, which endorsed it in favor of Sanshell. Sanshell then made use of and/or negotiated the check. Accompanying the exchange of checks was a Deed of Assignment executed by Nyco Sales (assignor) in favor of BA Finance (assignee) with the conformity of Sanshell. Under the said Deed, the subject of the discounting was P60k BPI check.

The check bounced. BA Finance notified Sanshell. Sanshell substituted the BPI check with a Security Bank and Trust Company check for P60k. This check again bounced. BA Finance made repeated demands to Nyco Sales and Sanshell but neither of the two settled the obligation. Hence, BA Finance sued Nyco Sales. Nyco Sales averred that it received no notice of dishonor when the second check was dishonored.

ISSUE: Whether or not Nyco Sales is liable to pay BA Finance.

HELD: Yes. The relationship between Nyco Sales and BA Finance is one of assignor-assignee. The assignor-vendor warrants both the credit itself (its existence and legality) and the person of the debtor (his solvency), if so stipulated, as in the case at bar. Consequently, if there be any breach of the above warranties, the assignor-vendor should be held answerable therefor. There is no question then that the assignor-vendor is indeed liable for the invalidity of whatever he assigned to the assignee-vendee. Considering now the facts of the case at bar, it is beyond dispute that Nyco executed a deed of assignment in favor of BA Finance with Sanshell Corporation as the debtor-obligor. BA Finance is actually enforcing said deed and the check covered thereby is merely an incidental or collateral matter. This particular check merely evidenced the credit, which was actually assigned to BA Finance. Thus, the designation is immaterial as it could be any other check. It is only what is represented by the said checks that Nyco is being asked to pay.

Great Asian Sales Center vs Court of AppealsG.R. No. 105774April 25, 2002

FACTS:Great Asian is engaged in the business of buying and selling general merchandise, in

particular household appliances.  On March 17, 1981, the board of directors of Great Asian approved a resolution authorizing its Treasurer and General Manager, Arsenio Lim Piat, Jr. (“Arsenio” for brevity) to secure a loan from Bancasia in an amount not to exceed P1.0 million.  The board resolution also authorized Arsenio to sign all papers, documents or promissory notes necessary to secure the loan.  On February 10, 1982, the board of directors of Great Asian approved a second resolution authorizing Great Asian to secure a discounting line with Bancasia in an amount not exceeding P2.0 million.  The second board resolution also designated Arsenio as the authorized signatory to sign all instruments, documents and checks necessary to secure the discounting line.

On March 4, 1981, Tan Chong Lin signed a Surety Agreement in favor of Bancasia to guarantee, solidarily, the debts of Great Asian to Bancasia.  On January 29, 1982, Tan Chong Lin signed a Comprehensive and Continuing Surety Agreement in favor of Bancasia to guarantee, solitarily, the debts of Great Asian to Bancasia.  Thus, Tan Chong Lin signed two surety agreements (“Surety Agreements” for brevity) in favor of Bancasia.

Great Asian, through its Treasurer and General Manager Arsenio, signed four (4) Deeds of Assignment of Receivables (“Deeds of Assignment” for brevity), assigning to Bancasia fifteen (15) postdated checks.  Nine of the checks were payable to Great Asian, three were payable to “New Asian Emp.”, and the last three were payable to cash.  Various customers of Great Asian issued these postdated checks in payment for appliances and other merchandise.

Great Asian and Bancasia signed the first Deed of Assignment on January 12, 1982 covering four postdated checks with a total face value of P244, 225.82, with maturity dates not later than March 17, 1982.  Of these four post-dated checks, two were dishonored.  Great Asian and Bancasia signed the second Deed of Assignment also on January 12, 1982 covering four postdated checks with a total face value of P312, 819.00, with maturity dates not later than April 1, 1982.  All these four checks were dishonored. Great Asian and Bancasia signed the third Deed of Assignment on February 11, 1982 covering eight postdated checks with a total face value of P344, 475.00, with maturity dates not later than April 30, 1982.  All these eight checks were dishonored.  Great Asian and Bancasia signed the fourth Deed of Assignment on March 5, 1982 covering one postdated check with a face value of P200, 000.00, with maturity date on March 18, 1982.  This last check was also dishonored.  Great Asian assigned the postdated checks to Bancasia at a discount rate of less than 24% of the face value of the checks.Arsenio endorsed all the fifteen dishonored checks by signing his name at the back of the checks.  Eight of the dishonored checks bore the endorsement of Arsenio below the stamped name of “Great Asian Sales Center”, while the rest of the dishonored checks just bore the signature of Arsenio.  The drawee banks dishonored the fifteen checks on maturity when deposited for collection by Bancasia, with any of the following as reason for the dishonor: “account closed”, “payment stopped”, “account under garnishment”, and “insufficiency of funds”.  The total amount of the fifteen dishonored checks is P1, 042,005.00.

ISSUES1. Whether or not Arsenio had authority to execute the Deeds of 

Assignment and thus bind Great Asian2. Whether or not Great Asian is l iable to Bancasia under the

Deeds of Assignment for breach of contract pursuant to t h e c i v i l c o d e , i n d e p e n d e n t o f t h e n e g o t i a b l e instruments law

3. Whether or not Tan Chong Lin is l iable to Great Asian under the surety agreements.

HELD1. YES. The Corporation Code of the Philippines vests in the board of

directors the exercise of the corporate powers of the corporation, save in those instances where the C o d e r e q u i r e s s t o c k h o l d e r s ’ a p p r o v a l f o r c e r t a i n specific acts. In the ordinary course of business, a corporation can borrow funds or dispose of assets of  the c o r p o r a t i o n o n l y o n a u t h o r i t y o f t h e b o a r d o f   directors. The board of directors normally designates one or more corporate officers to sign loan documents or deeds of assignment for the corporation.-To secure a credit accommodation from Bancasia, the b o a r d o f d i r e c t o r s o f G r e a t A s i a n a d o p t e d 2 b o a r d resolutions on different dates. (text of resolutions s h o w n i n c a s e ) A s p l a i n a s d a y l i g h t , t h e 2 b o a r d resolutions clearly authorized Great Asian to secure a loan or discounting l ine from Bancasia. The 2 board resolutions also categorically designated Arsenio as the a u t h o r i z e d s i g n a t o r y t o s i g n a n d d e l i v e r a l l t h e implementing documents, including checks, for GreatAsian. There is no iota of doubt whatsoever about the p u r p o s e o f t h e 2 b o a r d r e s o l u t i o n s , a n d a b o u t t h e authority of Arsenio to act and sign for Great Asian.Arsenio had all the proper and necessary authority from the board of directors of Great Asian to sign the Deeds of Assignment and to endorse the fifteen postdated checks. Arsenio signed the Deeds of Assignment as agent and authorized signatory of Great Asian under an authority expressly granted by its board of directors. The signature of Arsenio on the Deeds of Assignment is effectively also the signature of the board of directors of Great Asian, binding on the board of directors and on Great Asian itself.

2. YES. Bancasia’s complaint against Great Asian is founded on the latter’s breach of contract under the Deeds of  Assignment. The Deeds of Assignment uniformly provided for one vital suspense condition: in case the drawers fail to pay the checks on maturity, Great Asian obligated itself to pay Bancasia the full face value of  the dishonored checks, including penalty and attorney’s fees. The failure of the drawers to pay the checks is a suspensive condition, the happening of which gives rise to Bancasia’s right to demand payment from Great Asian. This conditional obligation of Great Asian arises from its written contracts with Bancasia as embodied in the Deeds of Assignment.-By express provision in the Deeds of Assignment , Great Asian unconditionally obligated itself to pay Bancasia the full value of the dishonored checks. In short , Great Asian sold the postdated checks on with recourse basis against itself. This is an obligation that Great Asian is bound to faithfully comply because it has the force of law as between Great Asian and Bancasia, as provided in Art 1159 of the Civil Code. Great Asian and Bancasia agreed on this specific with recourse stipulation, despite the fact that the receivables were n e g o t i a b l e i n s t r u m e n t s w i t h t h e e n d o r s e m e n t o f   Arsenio. The contracting parties had the right to adopt the stipulation, which is separate and distinct from the w a r r a n t i e s o f a n e n d o r s e r u n d e r t h e N e g o t i a b l e Instruments Law.

-The explicit with recourse stipulation against Great Asian effectively enlarges, by agreement of the parties, t h e l i a b i l i t y o f G r e a t A s i a n b e y o n d t h a t o f a m e r e endorser of a negotiable instrument. Thus, whether or not Bancasia gives notice of dishonor to Great Asian, the latter remains l iable to Bancasia because of the with recourse stipulation which is independent of the w a r r a n t i e s o f a n e n d o r s e r u n d e r t h e N e g o t i a b l e Instruments Law.-There is nothing in the Negotiable Instruments Law or in the Financing Company Act , that prohibits Great Asian and Bancasia parties from adopting the with recourse stipulation uniformly found in the Deeds of  Assignment. Instead of being negotiated, a negotiable i n s t r u m e n t m a y b e a s s i g n e d . A s s i g n m e n t o f a negotiable instrument is actually the principal mode of conveying accounts receivable under the Financing Company Act. Since in discounting of receivables the assignee is subrogated as creditor of the receivable, the endorsement of the negotiable instrument becomes necessary to enable the assignee to collect from the drawer. This is particularly true with checks because collecting banks will not accept checks unless endorsed by the payee. The purpose of the endorsement is merely to facil itate collection of the proceeds of the checks.