NEGOTIABLE INSTRUMENTS NOTES

BASED ON AGBAYANIS BOOK AND ATTY. MERCADOS 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
managers 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 managers 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 managers check, which is
essentially a banks 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 delaybut 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 wasnt
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
didnt 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 Wongs 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 Wongs 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 isnt
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