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CHECKS

STATE INVESTMENT HOUSE vs. INTERMEDIATE APPELLATE COURT, ANITA PEA CHUA and HARRIS CHUA
G.R. No. 72764 | 13 JULY 1989
Petition to review the decision of the CA
Fernan, C.J.
FACTS:

Before 5 September 1980, New Sikatuna Wood Industries, Inc. (New Sikatuna) requested for a loan from Harris
Chua (Harris), which the latter agreed to, on the condition that the former should wait until December 1980
when he would have the money.
Anita Pea-Chua (Anita, Harris wife) issued 3 crossed checks payable to New Sikatuna all postdated 22
December 1980; with the total amount of P299,450.00.
Subsequently, New Sikatuna entered into an agreement with State Investment House, Inc. (State Investment)
whereby for and in consideration of the sum of P1,047,402.91 under a deed of sale --- i.e., New Sikatuna
assigned and discounted with State Investment 11 postdated checks, which included those issued by Anita.
When deposited, said 3 checks were dishonored due to insufficient funds, stop payment and account
closed, respectively.
State Investment claims that despite demands, Anita failed to pay, necessitating them to file an action for
collection against Anita and Harris before RTC Manila.
Spouses Chua filed a third-party complaint against New Sikatuna; and for failure of the latter to answer, it
was declared in default.
RTC rendered judgment against the spouses i.e. spouses to pay State Investment, and for New Sikatuna to
pay spouses.
CA reversed i.e. complaint is dismissed.

ISSUE: Whether State Investment is a holder in due course and is thus entitled to hold the spouses liable for the
dishonored crossed checks.
HELD: NO. CA judgment AFFIRMED.
RATIO:
State Investment is not a holder in due course and cannot allege that it had no knowledge of the
transaction/arrangement between New Sikatuna and spouses Chua because the checks in question are
crossed checks. When it rediscounted the checks knowing that it was crossed checks, it was knowingly
violating the avowed intention of crossing the check. Its failure to inquire from New Sikatuna the purpose of
the crossed checks prevents him from being considered in good faith and is thus not a holder in due course.
Sec. 541, NIL provides that the maker or any legal holder of a check is entitled to indicate that such be paid
to a certain banker or institution, by writing across the face the name of said banker or institution, or only
the words and company. Under usual practice, crossing a check is done by placing two parallel lines
diagonally on the left top portion of the check.
The effect of crossing a check relates to the mode of its presentment for payment. Under Sec. 72, NIL
presentment for payment is sufficient when it is made by the holder, or by some authorized person to
receive payment. Who the holder or authorized person is depends on the instructions on the face of the
check.
In the present case, said 3 crossed checks were issued payable to New Sikatuna and only means that the
drawer had intended the same for deposit only by the rightful person (payee named therein). It was not the
payee who presented, therefore, there was no proper presentment, and the liability did not attach to the
drawer.
In the absence of due presentment, the drawer does not become liable. No right of recourse is available to
State Investment against the drawer, Anita. It was not the proper party authorized to make presentment of
the checks.
*State Investment may recover from New Sikatuna, especially if it has no valid excuse for refusing payment.
MAMANALO

NEGOTIABLE INSTRUMENTS

CHECKS

MYRON C. PAPA, Administrator of the Testate Estate of Angela M. Butte vs. A.U. VALENCIA and CO., INC.,
FELIX PEARROYO, SPS. ARSENIO B. REYES & AMANDA SANTOS, and DELFIN JAO
G.R. No. 105188 | 23 JANUARY 1998
Petition to review the decision of the CA
Kapunan, J.
FACTS:

ISSUE:
HELD:

15 June 1973 Papa, as attorney in fact of Butte, sold a parcel of land to Penarroyo through Valencia (286.60
sq. meters; cor. Retiro & Cadiz Sts., La Loma, QC)
Before the alleged sale, Butte mortgaged her properties (subject land included) to the Associated Banking
Corporation (now Associated Citizens Bank).
After the alleged sale, but before the title to subject land had been released, Butte passed away
Despite representations made by respondents to the bank, the latter refused to release the title unless &
until all the mortgaged properties were also redeemed.
To protect his rights & interests, Pearroyo caused the annotation on the title of an adverse claim incscribed
on 18 January 1977.
Upon release of the title resondents discovered that the mortgaged rights of the bank had been assigned to
Tomas Parpana, as special administrator of the Estate of Ramon Papa, Jr., and that Papa had been collecting
monthly rentals of P800.00 from tenants of the property already sold.
Despite repeated demands, petitioner refused & failed to deliver the title
June 1982 Respondents Valencia and Pearroyo filed a complaint for specific performance with RTC Pasig
against petitioner Papa, in his capacity as administrator of the Testate Estate of Angela Butte.
RTC rendered judgment in favor of respondents ordering petitioner to issue a Deed of Absolute Sale.
On appeal to the CA, petitioner alleged that the sale was not perfected since he did not encash the check
(P40,000.00) given by the respondents as fully payment.
CA affirmed with modification, i.e. to deliver title to respondent; & also upheld the presumption that the
check was encashed, especially since petitioner cannot recall the transaction because it occurred 10 years
ago (receipt was issued by petitioner).
Whether the issuance of a receipt (acceptance) for a check proves/effects payment
YES!

RATIO:

The Court upheld the exception to Art. 1249 CC (delivery of check produces payment only when encashed), i.e. if
the debtor is prejudiced by the creditors unreasonable delay in presentment, the delivery of the check
produces payment. 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 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.
Under Art. 1249, payment by way of check or other negotiable instrument is conditioned on its being cashed,
except when through the fault of the creditor, the instrument is impaired. [payee = creditor; non-payment
caused by his negligence will have the effect of payment & the obligation for which the check was given as
conditional payment will be discharged]

MAMANALO

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SINCERE Z. VILLANUEVA vs. MARLYN P. NITE

G.R. No. 148211 | 25 JULY 2006
Petition to review the decision of the CA
Corona, J.
FACTS:

ISSUE:
HELD:

Respondent Nite obtained a loan of P409,000.00 from Villanueva.

Whether the issuance of a receipt (acceptance) for a check proves/effects payment
YES!

RATIO:

The Court upheld the exception to Art. 1249 CC (delivery of check produces payment only when encashed), i.e. if
the debtor is prejudiced by the creditors unreasonable delay in presentment, the delivery of the check
produces payment. 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 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.
Under Art. 1249, payment by way of check or other negotiable instrument is conditioned on its being cashed,
except when through the fault of the creditor, the instrument is impaired. [payee = creditor; non-payment
caused by his negligence will have the effect of payment & the obligation for which the check was given as
conditional payment will be discharged]

MAMANALO