Far East Realty Investment Inc. v. Court of Appeals
REITERATIONFacts
The Antecedents: Petitioner Far East Realty Investment Inc. (FERI) filed a complaint against private respondents Dy Hian Tat, Siy Chee, and Gaw Suy An for the collection of P4,500.00, representing the face value of an unpaid and dishonored check. FERI alleged that on September 13, 1960, the private respondents approached FERI for an accommodation loan of P4,500.00, promising to pay it jointly and severally within one month with 14% annual interest. They delivered China Banking Corporation Check No. VN-915564, dated September 13, 1960, for P4,500.00, drawn by Dy Hian Tat and signed by the respondents at the back, with the assurance that it would be honored after one month. FERI extended the loan. The check was presented for payment on March 5, 1964, but it bounced because the drawer's account had been closed. FERI demanded payment, but the respondents failed and refused to pay. Procedural History: The City Court of Manila ruled in favor of FERI, ordering the private respondents to pay jointly and severally P4,500.00 with interest and attorney's fees. The Court of First Instance of Manila affirmed this decision. However, the Court of Appeals reversed the judgment, finding that the check was not given as collateral for a loan secured by the respondents who allegedly approached FERI as a group. The appellate court found that the check passed through other hands before reaching FERI and was not presented within a reasonable time. FERI's motion for reconsideration was denied. The Petition: FERI filed a petition for review with the Supreme Court, questioning whether presentment for payment and notice of dishonor were made within a reasonable time.
Issue(s)
Whether presentment for payment and notice of dishonor of the questioned check were made within a reasonable time. Whether the drawer and endorsers are discharged from liability due to unreasonable delay in the presentment of the check.
Ruling
The petition is devoid of merit. The Supreme Court affirmed the decision of the Court of Appeals, denying the petition for review.
Ratio Decidendi
On whether presentment for payment and notice of dishonor were made within a reasonable time: The Court held that presentment for payment and notice of dishonor were not made within a reasonable time. The check was issued on September 13, 1960, but was presented to the drawee bank only on March 5, 1964, and dishonored on the same date. A formal notice of dishonor was sent by FERI through a letter dated April 27, 1968. The Court found that FERI failed to exercise prudence and diligence as required by law and did not show any justification for the unreasonable delay. The Court reiterated that "reasonable time" depends on the peculiar facts and circumstances of each case and is defined as so much time as is necessary under the circumstances for a reasonably prudent and diligent man to do, conveniently, what the contract or duty requires, having regard for the rights and possibility of loss to the other party. The delay in this case, from September 13, 1960, to March 5, 1964, for presentment, and April 27, 1968, for notice of dishonor, was clearly unreasonable. On whether the drawer and endorsers are discharged from liability due to unreasonable delay: The Court affirmed the ruling of the Court of Appeals that the private respondents were discharged from liability. While the petitioner argued that presentment may be dispensed with if useless, and that the drawer is liable even with delay if no loss is proven, the Court found that the delay in this case was so unreasonable as to discharge the parties secondarily liable. The Negotiable Instruments Law provides that where presentment or notice is delayed without excuse, the drawer or endorser is discharged only "pro tanto" or to the extent of the loss suffered. However, the Court found the delay here to be excessive and not excused, leading to the discharge of the drawer and endorsers. The private respondents' argument that the check was not delivered directly to the petitioner for value, and that the petitioner was not a holder in due course, further supported the dismissal of the claim.
Main Doctrine
Presentment for payment and notice of dishonor must be made within a reasonable time. Unreasonable delay in presentment discharges the drawer and endorsers, but the loss must be proven by the drawer. However, presentment and notice are not required if they would be useless due to the drawer's conduct or insufficient funds.