G.R. No. L-4388 – 91 Phil. 756 – Mercantile Law – Negotiable Instruments Law – Liabilities of Parties – Parties Secondarily Liable
In 1948, Gan Yek Kiao drew a check in the amount of P5,000.00 payable to cash or to bearer. The check was delivered to Benito Seeto. Seeto presented the check to Philippine National Bank for payment. PNB gave Seeto the amount of the check. The check was later dishonored. PNB asked Seeto to refund the amount given to him but Seeto refused because he said the cause of the dishonor was PNB’s unreasonable delay in encashing it. PNB invoked Section 84 of the Negotiable Instruments Law which states:
SEC. 84. Liability of person secondarily liable, when instrument dishonored. – Subject to the provisions of this Act, when the instrument is dishonored by nonpayment, an immediate right of recourse to all parties secondarily liable thereon accrues to the holder.
ISSUE: Whether or not PNB is correct.
HELD: No. Section 84 of the Negotiable Instruments Law must be coupled with Section 186 of the same law which states:
SEC. 186. Within what time a check must be presented. – 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.
In effect, Seeto was discharged from liability as a secondary party. Section 186 expressly requires that a check must be presented for payment within a reasonable time after issue. It has been ruled in a lot of cases that unreasonable delay in the presentment of a negotiable instrument discharges a drawer only to the extent of the loss caused thereby but an indorser is wholly discharged thereby irrespective of any question of loss or injury. Only when there is affirmative proof that the indorser knew when he cashed the check that there would be no funds in the bank to meet it can this rule be avoided.
