NEGOTIABLE INSTRUMENTS NOTES

BASED ON AGBAYANI’S BOOK AND ATTY. MERCADO’S LECTURES

Page 181 of 190

BY: MA. ANGELA LEONOR C. AGUINALDO

ATENEO LAW 2D BATCH 2010

BY MUTUAL AGREEMENT OF THE PARTIES, THE NEGOTIABLE CHARACTER OF A CHECK MAY BE WAIVED AND THE INSTRUMENT BE SIMPLY TREATED AS PROOF OF AN OBLIGATION. There cannot be deceit on the part of the spouses because they agreed with the lender at the time of the issuance and postdating of the checks that the same shall not be encashed or presented to the bank. As per assurance of the lender, the checks are nothing but evidence of the loan or security thereof in lieu of and for the same purpose as a promissory note.

182 THE INTERNATIONAL CORPORATE BANK V. SPOUSES GUECO

315 SCRA 516

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. HELD: The main issue though unrelated to NIL in this case was whether or not the signing of the joint motion to dismiss a part of the compromise agreement between the spouses and the bank. The answer is no, it is not a part of the compromise agreement entered by the parties. And thus, the signing is dispensible 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 encashed. 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 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.

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.

183 WONG V. CA 351 SCRA 100

FACTS: Petitioner was an agent for Limtong Press, a manufacturer of calendars. LPI would give sample calendars to their agents and the agents would get the purchase orders of customers and present them to the company. The company would then make the calendars and ship them to the customers. The agents would then collect the payments and remit it to the company. He had a record of unremitted payments and a confirmation receipt evidenced this. Because of this, it became a company policy that postdated checks must be issued by customers to secure payment for the orders. Thereafter, Wong issued 6 postdated checks. But this wasn’t accepted by the company since it was against its policy to accept checks from its agents. It was then agreed upon that the checks would be applied to its unremitted payments. When the checks were about to be deposited, Wong requested that it be deferred and he will replace the same. But this didn’t happen. The checks were then subsequently deposited and dishonored which prompted the company to sue Wong. HELD: The trial and appellate court both ruled that Wong’s checks were to be used as guarantees but due to refusal of the company, it was agreed upon that it will be used as payment for Wong’s unremitted payments. On the issue if all the elements of violations of BP22 has been committed, there are two ways of violating BP22:

1. By making or drawing or issuing a check to apply on account or for value knowing at the time of issue that the check isn’t sufficiently funded

2. By having sufficient funds in or credit with the drawee bank at the time of issue but failing to keep sufficient funds therein or credit with said bank to cover the full amount of the check when