PRESENTATION FOR PAYMENT OF NEGOTIABLE INSTRUMENTS Sec. 70. Effect of want of demand on principal debtor. - Presentment for payment is not necessary in order to charge the person primarily liable on the instrument; but but if the instrument is, by its terms, payable at a special place, and he is able and willing to pay it there at maturity, such ability and willingness are equivalent to a tender of payment upon his part. But except as herein otherwise provided, presentment for payment is necessary in order to charge the drawer and indorsers.
MEANING OF PRESENTMENT FOR PAYMENT • Production of a bill of exchange exchange to the drawee drawee for his acceptance, or to the drawee or acceptor for payment or the production of the promissory note to the person liable for for payment of the same 1. Personal demand for for payment payment at the proper place 2. With the bill or note in readiness to exhibit exhibit it as required and to receive payment and surrender it if the debtor is willing to pay
PRESENTMENT FOR PAYMENT NOT NECESSARY TO CHARGE PERSONS PRIMARILY LIABLE • It cannot be validly claimed that it is presentment of the bill which is the operative act that makes the acceptor liable under his acceptance
PAYABLE AT A SPECIAL PLACE • If the bill bill is payable at the PNB, is it necessary to make presentment presentment for payment to X in order to charge him? No, the rule is the same. The only effect effect is that if, X is able and willing willing to pay the bill at the PNB at maturity, it is equivalent to a tender of payment on the part of drawee X.
PRESENTMENT NECESSARY TO CHARGE PERSONS SECONDARILY LIABLE
NECESSARY STEPS TO CHARGE PERSONS SECONDARILY LIABLE IN BILLS OF EXCHANGE 1. In the three three steps required by law, presentment for acceptance to to the drawee or negotiation within within reasonable time after acquisition unless excused 2. If the bill is dishonored by non-acceptance, notice of dishonor by non-acceptance must be given to persons secondarily liable unless excused and in case of foreign bills, protest for dishonor by non-acceptance must be made unless excused 3. But if the bill is accepted, or if the bill isn’t required to be presented for acceptance, a cceptance, it must m ust be presented for payment to the persons primarily primarily liable unless excused 4. If the bill is dishonored by non-payment, notice of dishonor by non-payment must be also be given to person secondarily liable unless excused, and in case of foreign bills, protest for dishonor by non-pay7ment must be made unless excused
NECESSARY STEPS TO CHARGE PERSONS SECONDARILY LIABLE • Presentment for payment must be made within the period required to the person primarily liable unless excus ed • If the note is dishonored by non-payment, notice of dishonor by non-payment must be given to the person secondarily liable unless excused
Presentment where instrument is not payable on demand and payable on demand Sec. 71. Presentment where instrument is not payable on demand and where payable on demand. Where the instrument is not payable on demand, presentment must be made on the day it falls due. Where it is payable on demand, presentment must be made within a reasonable time after its issue, except that in the case of a bill of exchange, presentment for payment will be sufficient if made within a reasonable time after the last negotiation t hereof.
WHEN PAYABLE AT A FIXED OR DETERMINABLE FUTURE TIME •
The presentment must be made at the date of m aturity
WHEN PAYABLE ON DEMAND IN CASE OF NOTES • The time for presentment depends upon whether the instrument is a bill or a note • If it is a note, it must be presented for payment within reasonable time for issue • If it is a bill, it must be p resented for payment within reasonable time from last negotiation and not for issue, as in the case of notes
CASE DIGESTS: SECTION 71
FAR EAST REALTY INVESTMENT V. CA 166 SCRA 256 FACTS: Private respondents approached petitioner and asked the latter to extend to them an accommodation loan. They proposed to pay with interest. They even gave a check, signed by Tat, drawn against Chinabank, and signed at the back by the private respondents. They said that they will change the check with cash after one month and if not, the check could be presented for payment and it would be paid. The loan was actually extended but when the check was presented for payment, it was dishonored —the account on which it is drawn has long been closed. The trial courts held in favor of petitioner but this was reversed by the appellate court by ruling that the check has passed through other hands before reaching the petitioner and the said check wasn’t presented within reasonable time and after its issuance.
HELD: Where the instrument is not payable on demand, presentment must be made on the day it falls due. Where it is payable on demand, presentment m ust be made within a reasonable time after issue , except that in case of a bill of exchange, presentment for payment is sufficient if made within reasonable time after the last negotiation thereof. Notice may be given as soon as instrument has been dishonored and unless delay is excused must be given within the time fixed by law. In this case, presentment and notice of dishonor were not made within reasonable time. September 1960 —date when the check was drawn March 1964—presented to drawee bank April 1968—notice of dishonor
Sufficient presentment in negotiable instruments Sec. 72. What constitutes a sufficient presentment. - Presentment for payment, to be sufficient, must be made: (a) By the holder, or by some person authorized to receive payment on his behalf; (b) At a reasonable hour on a business day;
(c) At a proper place as herein defined; (d) To the person primarily liable on the instrument, or if he is absent or inaccessible, to any person found at the place where the presentment is made.
APPLICATION THIS OF SECTION •
Establishes the requisites for a sufficient presentment for payment
WHO MAKES PRESENTMENT • Presentment for payment must be made by the holder of the instrument or by some person authorized to receive payment on his behalf
TIME FOR MAKING PRESENTMENT •
At a reasonable hour on a business day
CASE DIGEST
STATE INVESTMENT HOUSE V. IAC 175 SCRA 310 FACTS: New Sikatuna requested for a loan from Spouses Chua. Latter issued post-dated crossed checks in favor of former. Thereafter, Sikatuna sold checks to SIHI which upon deposit, checks were dishonored. The trial court decided the case in favor of SIHI. HELD: Jurisprudence provides the following effects of crossing a check: 1. The check may not be encashed but only deposited in the bank 2. The check may be negotiated only once —to one who has an account with a bank 3. The act of crossing the check serves the warning to the holder that the check has been issued for a definite purpose so that he must inquire if he has received the check pursuant to that purpose, otherwise, he is not a holder in due course. The checks in issue were crossed generally and issued payable to New Sikatuna Wood which could only mean that the drawer has intended the same for deposit only by the rightful person. Apparently, it was not the payee who presented the same for payment and therefore, there was no proper presentment and the liability didn't attach to the drawer. Thus, in the absence of due presentment, the drawer didn't become liable. Consequently, no right of recourse is available to petitioner against the drawer of the subject checks considering that the petitioner is the proper party authorized to make presentment of the checks in question. Nonetheless, the holder could still collect from New Sikatuna if the latter doesn't have a valid excuse from refusing payment.
Exhibition of Negotiable Instruments For Payment Sec. 74. Instrument must be exhibited. - The instrument must be exhibited to the person from whom payment is demanded, and when it is paid, must be delivered up to the party paying it.
NECESSITY OF EXHIBITION OF INSTRUMENT • Presentment includes not only demand for payment but also the exhibition of the instrument • Purpose is to enable the debtor to determine the genuineness of the instrument and the right of the holder to receive payment and to enable him to retain possession upon payment
A DEMAND BY TELEPHONE IS INSUFFICIENT
WHEN EXHIBITION EXCUSED 1. 2.
When the debtor doesn’t demand to see the instrument but refuses payment on some other grounds When the instrument is lost or destroyed
CASE DIGESTS
ANSALDO V. CA, 177 SCRA 8 FACTS: TFC issued promissory notes in favor of PCIB. At about the same time, TFC extended loans to Ansaldo and Reyes. These loans were evidenced by promissory notes, each waiving demand, presentment, protest, and notice of protest and non-payment. TFC then paid part of its obligation with PCIB. To pay for its outstanding balance, it endorsed the notes issued by Ansaldo and Reyes. Claiming that the notes have matured without payment by Ansaldo and Reyes, the bank instituted actions against them.
HELD: The contention of Ansaldo that the instrument should have been first presented to him is bereft of merit. First, it couldn’t be first raised on appeal.
Second, it is a petty issue for if according to him, such an exhibition was needed to give him opportunity to determine the genuineness of the instrument, this was rendered unnecessary not only by his omission to contest it, but also by his admission of the authenticity of the note implicit from his averm ent that he made substantial payments thereon and second, he made a waiver of demand, presentment, etc.
Presentment to partners, joint debtors, where debtor is dead Sec. 76. Presentment where principal debtor is dead. - Where the person primarily liable on the instrument is dead and no place of payment is specified, presentment for payment must be made to his personal representative, if such there be, and if, with the exercise of reasonable diligence, he can be found. Sec. 77. Presentment to persons liable as partners. - Where the persons primarily liable on the instrument are li able as partners and no place of payment is specified, presentment for payment may be made to any one of them, even though there has been a dissolution of the firm. Sec. 78. Presentment to joint debtors. - Where there are several persons, not partners, primarily liable on the instrument and no place of payment is specified, presentment must be made to them all.
SECTIONS 76 TO 78 NOT APPLICABLE WHERE PLACE SPECIFIED •
Applies only where there is no place s pecified
WHERE PERSON PRIMARILY LIABLE DEAD • • • the
Presentment must be made to the executor or administrator if there is one and if he can be found The holder must use diligence to find the personal representative if there be one The person primarily liable is dead, there is a personal representative, and no place of payment indicated in instrument —if there is a place indicated, then presentment should be done there
WHERE PERSONS PRIMARILY LIABLE ARE PARTNERS THE PRESENMENT MUST BE MADE TO ANY ONE OF THEM WHERE PERSONS PRIMARILY LIABLE ARE JOINT DEBTORS, PRESENTMENT MUST BE MADE TO ALL OF THEM
When presentment not required to charge the drawer / indorser Sec. 79. When presentment not required to charge the drawer. - Presentment for payment is not required in order to charge the drawer where he has no right to expect or require that the drawee or acceptor will pay the instrument. Sec. 80. When presentment not required to charge the indorser. - Presentment is not required in order to charge an indorser where the instrument was made or accepted for his accommodation and he has no reason to expect that the instrument will be paid if presented.
APPLICATION OF SECTION 79 AND 80 • These provisions give exceptions to the general rule that if no presentment for payment is made, the persons primarily liable are discharged
WHERE DRAWER NEED NOT BE GIVEN NOTICE • Where A withdraws his funds from X, drawee bank, so that they are not sufficient to pay the bill, he has no right to expect or require that the drawee or acceptor would pay the instrument • Accordingly, where F holder doesn’t make a presentment to X, A drawer would not be discharged by such failure
PRESENTMENT IS NOT REQUIRED TO CHARGE THE DRAWER IN THE FOLLOWING CASES 1. In case the check upon which payment has been stopped 2. Where the drawer’s balance is less than th e amount of the check. The mere fact however that the drawer has no funds with drawee at the time he draws, doesn’t render presentment unnecessary if he still has reasonable grounds to believe that the instrument will be paid, particularly when provision has been made for payment of any bill drawn by the drawer on the drawee 3. Where the drawer of a bill containing the words “Pay from balance” had no money on deposit with the drawee but expected to arrange with the broker to cover drafts
Delay in making presentment of negotiable instruments Sec. 81. When delay in making presentment is excused. - Delay in making presentment for payment is excused when the delay is caused by circumstances beyond the control of the holder and not imputable to his default, misconduct, or negligence. When the cause of delay ceases to operate, presentment must be made with reasonable diligence.
EXCUSES FOR DELAY • Overwhelming calamity, malignant diseases, interruption of trade negotiations by political circumstances, etc.
Sec. 82. When presentment for payment is e xcused. - Presentment for payment is excused: (a) Where, after the exercise of reasonable diligence, presentment, as required by this Act, cannot be made; (b) Where the drawee is a fictiti ous person; (c) By waiver of presentment, express or implied.
APPLICATION OF SECTION 82 •
What is excused is failure to make presentment for payment and not mere delay
WAIVER MAY BE EXPRESS OR IMPLIED
IMPLIED WAIVER
(evident)
• Implied waiver of presentment may be manifested by any language or conduct or any agreement between the parties reasonably calculated to lead the holder to believe that presentment is waived or to mislead or prevent him from treating the bill as he otherwise would
SUMMARY OF RULES AS TO PRESENTMENT FOR PAYMENT 1. 2. a. b. c. d.
Presentment for payment is not necessary to charge persons primarily liable But it is necessary to charge a person secondarily liable except As to drawer, under Section 79 As to indorser, under Section 80 When dispensed with under Section 82 When the instrument has been dishonored by non-acceptance
ishonored Negotiable Instruments Sec. 83. When instrument dishonored by non-payment. - The instrument is dishonored by non-payment when: (a) It is duly presented for p ayment and payment is refused or cannot be obtained; or (b) Presentment is excused and the instrument is overdue and unpaid.
WHEN PAYMENT REFUSED, ETC. •
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 obligors —provided 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:
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 b ank didn’t 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.
Payment in due course Sec. 88 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 3. Payment must be made by the debtor in good faith and without notice that his title is defective • If payment is made before maturity, it would constitute a negotiation back to the person p rimarily liable and he can renegotiate it. Payment doesn’t discharge the instrument. • Payment to indorsee who is not in possession of the instrument is not payment to a person other than the holder is at the risk of the party so paying if the person wasn’t authorized by the holder to receive payment. So also, the payment to the original payee after the note had been transferred by him to a holder in due course doesn’t discharge the note • Payment to a person by the d ebtor who knows that such person stole it, is not payment in due course, as such payment is not in good faith. The maker of a note or the acceptor of a bill must satisfy himself, when it is presented for payment, that the holder traces his title through genuine indorsements, and if there is a forged indorsement, it is a nullity and no right passes by it
PAYMENT MUST BE MADE TO POSSESSOR OF INSTRUMENT • The party making payment must insist on the presentment of the paper by the party demanding payment in order to make sure that it is at the time in his possession and not outstanding in another • A receipt taken is no protection • If at the time he makes payment, it is outstanding and in the hands of a holder in due course, he must pay it again • Possession of notes by the maker is presumptive evidence
