NEGOTIABLE INSTRUMENTS NOTES

BASED ON AGBAYANIS BOOK AND ATTY. MERCADOS LECTURES

Page 102 of 190


BY: MA. ANGELA LEONOR C. AGUINALDO
ATENEO LAW 2D BATCH 2010
The instrument must be duly presented for payment and payment is
either refused or cannot be obtained

WHEN PRESENTMENT IS EXCUSED
Presentment for payment is excused
Instrument is overdue
It is unpaid

Sec. 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 liable thereon accrues to the
holder.

AFTER DISHONOR, INDORSERS, ETC. ARE PRIMARILY LIABLE
As to holder, after an instrument is dishonored by non-payment , the
persons secondarily liable thereon ceases to be secondarily liable
They become principal debtors and their liability becomes the same as
that of the principal obligorsprovided a notice of dishonor has been
given to them
If no notice is given, they are discharged
If they are charged by dishonor and notice, while it is true that they
become principal debtors as to the holder, yet as among themselves,
persons secondarily liable are presumed liable in the order that they
become parties to the instrument

CASE DIGEST: SECTION 84

137 PNB V. SEETO
91 SCRA 757

FACTS:
Seeto called at a branch of bank and presented a check payable to cash or
bearer, and drawn by Kiao against PBC. After consultation with the
employees, Seeto made a general and qualified indorsement of the check.
He was then paid the amount of the check by bank. The check was
consequently dishonored, a letter was sent to Seeto and was asked to
refund the money given to him. A second letter was sent to him and he
averred that case against him be deferred while he inquired about why the
check was dishonored. Thereafter, he refused to pay, alleging that the
account against the check was drawn had sufficient funds when the check
was drawn and if the bank didnt delay in clearing the check, there would
have been sufficient funds.

The appellate court reversed the lower court in its decision. It ruled that
the bank was guilty of unreasonably retaining and withholding the check,
and that the delay in the presentment was inexcusable, so that respondent
thereby was discharged from liability.

HELD:
Section 84 is applicable, nonetheless, it should be read in correlation with
Section 186, which says that presentment should be within reasonable
time.

Sec. 85. Time of maturity. - Every negotiable instrument is payable
at the time fixed therein without grace. When the day of maturity
falls upon Sunday or a holiday, the instruments falling due or
becoming payable on Saturday are to be presented for payment on
the next succeeding business day except that instruments payable
on demand may, at the option of the holder, be presented for
payment before twelve o'clock noon on Saturday when that entire
day is not a holiday.

Sec. 86. Time; how computed. - When the instrument is payable at
a fixed period after date, after sight, or after that happening of a
specified event, the time of payment is determined by excluding
the day from which the time is to begin to run, and by including the
date of payment.

Sec. 87. Rule where instrument payable at bank. - Where the
instrument is made payable at a bank, it is equivalent to an order
to the bank to pay the same for the account of the principal debtor
thereon.

EFFECT OF FAILURE TO MAKE PRESENTMENT FOR PAYMENTBUT
SUPPOSE THAT B OR ANY SUBSEQUENT HOLDER FAILS TO MAKE A
PRESENTMENT FOR PAYMENT AT THE PNB, IS A DRAWER DISCHARGED?
There is a conflict of authorities
Agbayanis view: A is not discharged because he is primarily liable

Sec. 88. What constitutes payment in due course. - Payment is
made in due course when it is made at or after the maturity of the
payment to the holder thereof in good faith and without notice that
his title is defective.

REQUISITES FOR PAYMENT IN DUE COURSE
1. Payment must be made at or after the date of maturity
2. Payment must be to the holder