05 - liability of parties (pp. 726-772).docx

7/28/2019 05 - Liability of Parties (pp. 726-772).docx

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f. Date of presentment of checksSec. 185. Checks defined.--A check is a bill of exchange drawn on a bank payable on demand. Except as hereinotherwise provided, the provisions of this Act applicable to a bill of exchange payable on demand apply to a check.

Sec. 186. Within what time a check must be presented.--A check must be presented for payment within areasonable time after its issue or the drawer will be discharged from liability thereon to the extent of the loss caused

by the delay.

Check is intended for immediate use Unlike in ordinary bills of exchange, the transfer of a check to successive holders DOES NOT EXTEND the

time for presentment (See Sec. 186) If no such loss is shown by the drawer, he remains liable despite the unreasonable delay

o Usual cause: Subsequent insolvency of the drawee banko In harmony with NCC 1249 - payment conditioned on its being encashed, EXCEPT where through

the fault of the creditor, the instrument is impaired Would an INDORSER be fully discharged in case of unreasonable delay [because the provisions only talk of

DRAWER]?o SC, in PNB v. Seeto: Yes, regardless of any loss suffered by him

REASONABLE TIME - reckoned from the LAST NEGOTIATION, not from date of issueo Despite the lapse of reasonable time, the check remains effective as an order of the drawer to the

drawee banko Banks however usually refuse to honor a check which has remained outstanding for more than 6

months (stale check) Holder usually required to get a new check from the drawer, or drawee bank will pay it

only after consulting the drawerFick v. Jones

Presentment, demand, and notice of dishonor are essential pre-requisites to an action against the drawer ona check.

Gordon v. Levine

Where the drawer, drawee and payee are all in the same city or town, a check, to be presented within areasonable time, should be presented at some time before the close of banking hours on the day after it isissued.

Its circulation from hand to hand will not extend the time of presentment to the detriment of the drawer. If it ispresented and paid afterwards, the drawer suffers no harm. But if not presented within the time thus fixed,and there is a loss, it falls not on him but on the holder.

Morrison v. McCartney

The drawer of a check will at all times be liable to pay the same, if the holder can show that the drawer hassustained and can sustain no loss or damage from the omission to demand payment at an earlier date, ofthe bank or banker on whom the check is drawn.

PNB v. Seeto

Presentment for acceptance of a CHECK is not required. Although the DRAWER of a check is discharged only to the extent of the loss caused by unreasonable delay

in presentment, an INDORSER is wholly discharged thereby, irrespective of any question of loss or injury. Supposed assurances of refund in case of dishonor of the check are precisely the ordinary obligations of an

indorser, and these obligations are considered discharged by an unreasonable delay in the presentation ofthe check for payment.

There was no express obligation assumed by the indorser in this case that the drawer would always havefunds, or that he [indorser] would refund the amount of the check even if there was delay in i ts presentation.

Campos notes that the Court failed to make reference to Sections 66 (due presentment is a condition to theindorser's liability) and 77 (presentment for payment of a demand bill is sufficient if made within a reasonabletime from its last negotiation).

Crystal v. CA

This case involved a redemption of property. In the end, it was remanded to determine WON the checkbecame stale in the hands of the creditor.

If the check had been DISHONORED -- redemption was NULL and VOID


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Chan Wan v. Tan Kim

In this case, the court said that the indorsee was correctly held to be NOT a HIDC, since he knew that thechecks had already been dishonored when he took them.

If it were true that the checks had been issued in payment for shoes that were never made and delivered,the drawer would have a good defense as against a holder who is not a holder in due course.

Campos notes that a check, on its face, normally has all the requisites of negotiability, and the addition ofthe words "non-negotiable" should not change its character as a negotiable instrument.

Associated bank v. CA

The effects of crossing a check Check may not be encashed but only deposited in the bank It may be negotiated only once--to one who has an account with the bank The act of crossing a check serves as a 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 The effects of crossing a check relate to the mode of its presentment for payment The position of a bank taking the check on the forged or unauthorized indorsement is the same as if it had

taken the check and collected without indorsement at all To simplify proceedings, the payee of the illegally encashed checks should be allowed to recover directly

from the bank responsible for such encashment, regardless of WON the checks were actually delivered tothe payee

(2) Time of presentment

Sec. 72.[] Presentment for payment, to be sufficient, must be made--b. At a reasonable hour on a business day;Sec. 75. Presentment where instrument payable at bank.--Where the instrument is payable at a bank,presentment for payment must be made during banking hours, unless the person to make payment has no fundsthere to meet it any time during the day, in which case presentment at any hour before the bank is closed on that dayis sufficient.

Where presented BEFORE or AFTER banking hours Presentment INEFFECTIVE if payment is refused by bank

Where maker has NO FUNDS on the date of maturity Even if presentment was made after banking hours but during office hours of the same day,

SUFFICIENT to charge secondary parties Demand earlier in the day is PREMATURE (since person to make payment has until the close of banking

hours to pay it)(3) Place of presentment

Sec. 73. Place of presentment.--Presentment for payment is made at the proper place:a. Where a place of payment is specified in the instrument and it is there presented;b. Where no place of payment is specified, but the address of the person to make payment is given in the

instrument and it is there presented;c. Where no place of payment is specified and no address is given and the instrument is presented at the

usual place at the usual place of business or residence of the person to make payment;d. In any other case if presented to the person to make payment wherever he can be found, or if presented at

his last known place of business or residence.

Presentment made at a place not authorized is NOT due presentment; not sufficient to charge indorsers

(4) To whom presentment must be made

Sec. 72 (d). To the person primarily liable on the instrument, or if he absent or inaccessible, to any person found atthe place where the presentment is made.

Sec. 76. Presentment where principal debtor is dead.--Where the person primarily liable on the instrument isdead, and no place of payment is specified, presentment for payment must be made to his personal representative, ifsuch there be, and if with the exercise of reasonable diligence he can be found.


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Sec. 77. Presentment to persons liable as partners.--Where the persons primarily liable on the instrument areliable as partners, and no place of payment is specified, presentment for payment may be made to any one of them,even though there has been a dissolution of the firm.

Sec. 78. Presentment to joint debtors.--Where there are several persons, not partners, primarily liable on theinstrument and no place of payment is specified, presentment must be made to them all.

j.

What constitutes dishonor by non-payment

Sec. 83. When instrument dishonored by non-payment.--The instrument is dishonored by non-payment when:a. If it is duly presented for payment and payment is refused or cannot be obtained; orb. Presentment is excused and the instrument is overdue and unpaid.

k. Effect of dishonor by non-paymentSec. 84. Liability of person secondarily liable, when instrument dishonored. Subject to the provisions of this Act,when the instrument is dishonored by non-payment, an immediate right of recourse to all parties secondarily liablethereon accrues to the holder.

This immediate right of recourse is further conditioned upon the giving of due notice An indorser whose liability has become fixed by demand and notice, is, as to the holder, a principal debtor

12. Notice of dishonora. When necessarySec. 89. To whom notice of dishonor must be given. --Except as herein otherwise provided, when a negotiableinstrument has been dishonored by non-acceptance or non-payment, notice of dishonor must be given to the drawerand to each indorser, and any drawer or indorser to whom such notice is not given is discharged.

Notice of dishonor - bringing, either verbally or in writing, to the knowledge of the drawer or indorser thefact that a specified negotiable instrument, upon proper proceedings taken, has not been accepted, or hasnot been paid, and that the party notified is expected to pay it

Holder is enforcing his right against them under their contract to pay should the instrument not bepaid or accepted at maturity

Indorser's knowledge that the maker was in default on a note does not dispense with notice of dishonor, andfailure to notify the indorser discharges his obligation

Situations

Primary party is dead Presentment is excused because no administrator has been appointed Notice of dishonor must be given if the instrument is OVERDUE and UNPAID

Accommodation indorsers Entitled to notice of dishonor

Joint maker Not an indorser Primarily liable, so not entitled to notice of dishonor

Re: Acceleration clause No acceleration clause - failure to notify indorser of the non-payment of previous

installments does not affect liability for later installments; each installment is considered aSEPARATE note

Acceleration clause optional on holder - holder has a reasonable time for the exerciseof the option; bringing of an ACTION is a valid exercise thereof, and is also a notice ofdishonor

Automatic acceleration clause - notice of dishonor must be given at once; not sufficientto give it upon commencement of action

Gullas v. PNB

Notice of dishonor is necessary in order to charge an indorser and that the right of action against him doesnot accrue until the notice is given


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b. Form and contents of noticeSec. 95. When notice sufficient.--A written notice need not be signed and an insufficient written notice may besupplemented and validated by verbal communication. A misdescription of the instrument does not vitiate the noticeunless the party to whom the notice is given is in fact misled thereby.

Sec. 96. Form of notice.--The notice may be in writing or merely oral, and may be given in any terms which

sufficiently identify the instrument, and indicate that it has been dishonored by non-acceptance or non-payment. Itmay in all cases be given by delivering it personally or through the mails.

The notice must be accompanied by language which will inform the party addressed that the instrument hadbeen duly presented. General language however will be sufficient.

Failure to state the date of the making and maturity of the note, and the name of the payee does notinvalidate the notice.

c. Time within which notice must be givenSec. 102. Time within which notice must be given. - Notice may be given as soon as the instrument is dishonoredand, unless delay is excused as hereinafter provided, must be given within the time fixed by this Act.

Sec. 103. Where parties reside in same place. - Where the person giving and the person to receive notice reside inthe same place, notice must be given within the following times:

a. If given at the place of business of the person to receive notice, it must be given before the close of businesshours on the day following.

b. If given at his residence, it must be given before the usual hours of rest on the day following.c. If sent by mail, it must be deposited in the post office in time to reach him in usual course on the day

following.

Sec. 104. Where parties reside in different places. - Where the person giving and the person to receive noticereside in different places, the notice must be given within the following times:

a. If sent by mail, it must be deposited in the post office in time to go by mail the day following the day ofdishonor, or if there be no mail at a convenient hour on last day, by the next mail thereafter.

b. If given otherwise than through the post office, then within the time that notice would have been received indue course of mail, if it had been deposited in the post office within the time specified in the last subdivision.

Sec. 105. When sender deemed to have given due notice. - Where notice of dishonor is duly addressed anddeposited in the post office, the sender is deemed to have given due notice, notwithstanding any miscarriage in themails.

Sec. 106. Deposit in post office; what constitutes. - Notice is deemed to have been deposited in the post-officewhen deposited in any branch post office or in any letter box under the control of the post-office department.

Sec. 107. Notice to subsequent party; time of. - Where a party receives notice of dishonor, he has, after thereceipt of such notice, the same time for giving notice to antecedent parties that the holder has after the dishonor.

Sec. 113. Delay in giving notice; how excused. - Delay in giving notice of dishonor is excused when the delay iscaused by circumstances beyond the control of the holder and not imputable to his default, misconduct, ornegligence. When the cause of delay ceases to operate, notice must be given with reasonable diligence.

These provisions apply to all cases of dishonor--WON by non-payment or non-acceptance Notice of dishonor by non-payment before maturity is PREMATURE and ineffective If a notice is not given within the time fixed, the notice is INOPERATIVE and the secondary party so notifiedis DISCHARGED Should a notice be given on a Sunday or a holiday, it is sufficient Effect of delay in giving notice of dishonor of a check on the liability of the drawer

Drawer is discharged No distinction between the drawer of a check and the drawer of an ordinary bill

The time within which notice must be given or sent is fixed by the location of the place to which he choosesto send the notice

Although non-receipt of a duly mailed notice does not discharge an indorser, evidence of such non-receipt isadmissible on the question of WON the notice was actually mailed


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05 - liability of parties (pp. 726-772).docx

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