Luis Wong VS Court of Appeals and People of the Philippines

G.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 Appeals
G.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 with
2. Whether or not presentment for payment and notice of dishonor of
the questioned check were made within reasonable time
Held:
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 Samar

G.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 Javier
G.R. No. 19051
April 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 Bank

G.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 Corporation

G.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 Appeals

G.R. No. 105774
April 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.

ISSUES
1. Whether or not Arsenio had authority to execute the Deeds of
Assignment and thus bind Great Asian
2. Whether or not Great Asian is liable to Ban casia 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 liable to Great Asian
under the surety agreements.

HELD
1. 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 specifi c acts. In the ordinary course of
business, a corporation can borrow funds or dispose of assets
of the corporation only on authority of the board
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 re solutions on
diff e rent 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 line f rom 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 Great
Asian. 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 fi fteen postd ated checks. Arsenio signed the Deeds of
Assignment as agent and authorized signatory of Great Asian under an
authority exp ressly granted by its board of di rectors.
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 Gre at 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, Gre at 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 ag reed on this specifi c with re course 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 re course 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 Ban casia gives notice of dishonor to Great
Asian, the latter re mains liable 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 re course stipulation uniformly found in the
Deeds of Assignment. Instead of being negotiated, a negotiable
instrument may be assigned. Assignment of a
negotiable instrument is actually the principal mode of conveying accounts
re ceivable under the Financing Company Act. Since in discounting of
receivables the assignee is subrog ated 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
facilitate collection of the proceeds of the checks.