VI – PRESENTATION FOR PAYMENT
Necessary steps to charge persons secondarily liable in bills of exchange – 1. Presentment for acceptance to the drawee or negotiation within reasonable time from acquisition is necessary –
SECTION 70 – EFFECT OF WANT OF DEMAND ON PRINCIPAL DEBTOR Presentment for payment – the production of a bill of exchange to the drawee for his acceptance or to the drawee or acceptor for payment or the production of the promissory note to the party liable for payment of the same.
a.
b.
Presentment for payment consists of – 1. 2.
c.
Personal demand for payment at the proper place With the bill or note in readiness to exhibit it if required and to received payment and surrender it if the debtor is willing to pay.
The following are not considered sufficient presentment – 1. 2.
2. If the bill is dishonored by non-acceptance –
Mere informal talk asking for payment without exhibition of the note Demand over the telephone
a. b.
Rule1: Presentment for payment is not necessary in order to the charge the person primarily liable on the instrument. *Rule applicable to demand notes
4. If the bill is dishonored by non-payment – a.
A: Yes because presentment for payment is not necessary to charge the person primarily liable on the instrument. This rule applies also to the maker.
b.
1.
Rule2: If the instrument by its terms, payable at a special place, and he (person primarily liable) is able and willing to pay it there at maturity, such ability and willingness are equivalent to a tender of payment upon his part.
2.
The rule is the same presentment for payment is not necessary in order to charge the person primarily liable. The only effect is that if the person primarily liable is able and willing to pay the bill, it is equivalent to the tender of payment on his part and the holder loses his right to recover interest due subsequent to maturity and costs of collection but he can still hold the drawee/acceptor liable. Rule3: Presentment for payment to the person primarily liable (drawee/acceptor) is necessary in order to charge persons secondarily liable (drawer and indorsers). Example: If F holder fails to make presentment for payment for payment to X, acceptor, the drawer A, and the indorsers B, C, D and E are discharged and F cannot file an action against them. Hence, only one debtor X would be left against whom he can enforce the bill. Effect if not presented for payment first to person primarily liable – Persons secondarily liable are discharged from liability and only the person primarily liable is left to answer for payment of the instrument.
Notice of dishonor by nonpayment must also be given to the person secondarily liable unless excused; and In case of foreign bills, a protest of dishonor by non-acceptance must be made unless excused.
Necessary steps to charge persons secondarily liable in promissory notes –
Payable at a special place
It means payable at a specified bank.
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 f the bill is not required to be presented for acceptance, it must be presented for payment to the persons primarily liable unless excused.
Example: A draws a bill payable to B or order. X, drawee accepts the bill which is due on March 31, 1950. B negotiates the bill to C, C to D, D to E, E to F, now holder. On April 1, 1950, the bill is still unpaid. But F failed to make presentment for payment to X, acceptor. Can F file an action against X and hold him liable?
*Presentment for payment is not the operative act that makes the acceptor liable under his acceptance.
Where the bill is payable after sight, or in any other case, where presentment for acceptance is necessary to fix the maturity of the instrument; Where the bill expressly stipulates that it shall be presented for acceptance; or Where the bill is drawn payable elsewhere than at the residence or place of business of the drawee. *Aside from the three, there is no need for presentment for acceptance.
Presentment for payment must be made within the period required to the person primarily liable unless excused; and If the note is dishonored by non-payment, notice of dishonor by nonpayment must be given to the persons secondarily liable unless excused.
Necessary steps to charge persons secondarily in other cases – 1. 2.
Protest for non-payment by drawee is necessary to charge an acceptor for honor or a referee in case of need. Protest for non-payment by the acceptor for honor is also required.
SECTION 71 – PRESENTMENT WHERE INSTRUMENT IS NOT PAYABLE ON DEMAND AND WHERE PAYABLE ON DEMAND Instrument is payable at a fixed or determinable future time (not payable on demand) – Rule: The presentment must be made at the date of maturity (the day it falls due). Example: In the above example, F must present for payment to X on March 31, 1950. A presentment before maturity is not proper.
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Instrument is payable on demand – 1.
If the instrument is a note, it must be presented for payment within a reasonable time for issue. Example: A makes a note payable to B or order issued on April 1, 1950. B negotiates to C, C to D, D to E and E to F. The holder, F, must present the note for payment to A, maker, within a reasonable time after April 1, 1950, the date of issue.
2.
4.
Examples: 1. Place specified A makes a note: I promise to pay at PNB, Manila, to X or order P1000. The proper place for making the presentment for payment is at PNB, Manila, the place specified. If the name of the bank is substituted, presentment at the substituted named bank not the original named bank is sufficient. Where payable at a designated branch, presentment to the principal office or at any other branch is not sufficient.
If the instrument is a bill, it must be presented for payment within a reasonable time from last negotiation. Example: A issues a bill to B or order on April 1, 1950. The date of its last negotiation is December 31, 1950. The presentment must be made within reasonable time after December 31, 1950, not after April 1, 1950.
2. Address given
Last negotiation- the last transfer for value
Promissory note signed as follows: (Sgd) Y, 404 Regina Bldg., Manila. The prper place is 404 Regina Bldg., Manila.
What constitutes reasonable time Section 193, NIL – The term is relative and depends upon: 1. 2. 3.
The nature of the instrument The usages of business or trade if any and The facts of the particular case
SECTION 72 – WHAT CONSTITUTES A SUFFICIENT PRESENTMENT
3. Usual place of business; last known place of business or residence No place is specified not any address is given. But the maker or acceptor resides in 12 Quiricada St. and has a business office at 240 Calvo Bldg., Manila. Either place is proper. 4. Any other place When the holder meets the maker or acceptor while waiting at the Escolta, presentment may properly be made there.
Presentment for payment, to be sufficient, must be made – 1. 2. 3. 4.
By the holder, or by some persons authorized to receive payment on his behalf; At a reasonable hour on a business day; At a proper place as herein defined; 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 of Section 72 – If the requisites are not complied with, the effect is the same as if no presentment is made i.e. the persons secondarily liable are discharged. Who makes presentment – holder or his authorized representative; presentment for payment of a promissory note by bank having it for collection is sufficient. Time for making presentment – what is a reasonable hour on business day depends upon the general custom at the place of the particular transaction. Presentment for payment cannot be made on a Sunday or a holiday. Where presentment is made – at the proper place as defined in Section 73 To whom presentment is made – the maker if a note or the acceptor if a bill, not to the person secondarily liable.
SECTION 73 – PLACE OF PRESENTMENT
the usual place of business of the person to make payment; In any other case if presented to the person to make payment wherever he can be found or if presented at his last known place of business or residence.
SECTION 74 – INSTRUMENT MUST BE EXHIBITED Rule: The instrument must be exhibited to the person from whom payment is demanded and when it is pad, must be delivered up to the party paying it. Unless special circumstances are shown to excuse its absence Purpose of exhibition— 1. 2.
To determine the genuineness of the instrument and the right of the holder to receive payment; and To enable him to reclaim possession upon payment.
Demand by telephone- not sufficient because exhibition of the instrument is not possible. When (actual) exhibition excused – 1. 2.
When the debtor does not demand to see the instrument but refuses on some other grounds; and When the instrument is lost or destroyed
Effect where presentment is not accompanied by exhibition – The presentment is not sufficient and persons secondarily liable are discharged
Presentment for payment is made at the proper place – 1. 2. 3.
Where a place of payment is specified in the instrument and it is there presented; Where no place of payment is specified but the address of the person to make payment is given in the instrument and it is there presented. Where no place of payment is specified and no address is given and the instrument is presented at
SECTION 75 – PRESENTMENT WHERE INSTRUMENT PAYABLE AT BANK GR: Presentment must be made during banking hours EXC: Unless the person to make the payment has no funds there to meet it at any time during the day, in which case
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presentment at any hour before the bank is closed on that day is sufficient. Effect if not made during banking hour -- presentment is not sufficient and persons secondarily liable are discharged Example: A bill is drawn against PNB where the banking hours start from 9:00 AM and ends at 2:30 PM. There are no banking hours in Saturdays. Presentment for payment must be made between 9:00 AM to 2:30 PM on ordinary days.
2.
Application of Sections 79 and 80 – Only the drawer or indorser referred in these sections is not discharged, but all other parties secondarily liable are relieved from their liability. Examples: Where presentment is not required to charge the drawer – 1.
But the person to make payment has until the close of banking hours of the bank where the instrument is made payable in which to pay it and before the close of such hours, he deposits funds there enough to pay it, a demand earlier in the day is premature. When presentment may be made after banking hours Example: Where X has no funds sufficient to meet the bill on the day of presentment, the presentment may be made before 4:00 pm and such would be sufficient as the bill cannot be paid even if presented during banking hours.
2. 3.
4. Presentment for Payment Where To persons To joint principal liable as debtors debtor is partners (Section dead (Section (Section 77) 78) 76) To whom presentmen t is made
To his personal representativ e (executor or administrator) –
At any one of the partners even if their partnership has been dissolved.
GR: Must be made to ALL of them.
1.
if there be one; and He can be found
Reason: Each partner is an agent of the partnership.
The holder must use reasonable diligence to find the personal representative if any.
In case of death of one of the makers who are partners, presentment must be made to the surviving partner, not to the personal representativ e of the deceased partner.
EXC: Unless one of them is duly authorized by the others for the purpose, presentmen t to him would be sufficient.
2.
Although the indorser himself be the personal representative, presentment has been held necessary.
GR: Presentment for payment to person primarily liable is necessary to charge persons secondarily liable (drawer and indorser) EXC: When presentment for payment is not required to charge – 1.
The drawer (Section 79) – where he has no right to expect or require that the drawee or acceptor will pay the instrument
The indorser (Section 80) – 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
Where the drawer withdraws his funds from the drawee 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. Consequently where the holder does not make a presentment to the drawee, the drawer would not be discharged by this failure. But other parties secondarily liable are discharged. In case a check upon which payment has been stopped Where the drawer’s balance is less than the amount of the check unless the holder 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. 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.
Where presentment not required to charge the indorser Example: A makes a note for accommodation of B, payee. B indorses to C, C to D, D to E, E to F. F need not make presentment for payment to A, in order to charge B, indorser. The reason is that as B did not give value to A, B has no reason to expect that the note will be paid upon presentment. But C, D and E are discharged as no presentment has been made. Reason: Here the accommodated party is the person primarily liable. Hence following the rule that failure to make presentment for payment will not discharge the person primarily liable, the accommodated payeeindorser, being in effect the person primarily liable is not discharged even if no presentment for payment is made to the accommodation party.
SECTION 81 – WHEN DELAY IN MAKING PRESENTMENT IS EXCUSED Rules: 1.
2.
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.
Application of Section 81 – What is excused here is not the making of presentment but only the delay in making presentment. Excusable circumstances- those events which could not be foreseen or which though foreseen, are inevitable. Excuses for delay: 1. 2. 3. 4.
Overwhelming calamity Malignant disease Interruption of trade negotiations by political circumstances War between maker’s and holder’s countries
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5. 6. 7. 8.
Suspension of commercial intercourse by public enemy Occupation of country where parties reside or where instrument is payable Public and positive interdictions and prohibitions of state Impracticability of finding maker or his place of residence
SECTION 82 – WHEN PRESENTMENT FOR PAYMENT IS EXCUSED 1. 2. 3.
Where after the exercise of reasonable diligence, presentment cannot be made; Where the drawee is a fictitious person; By waiver of presentment, express or implied
Application of Section 82 – What is excused is the failure to make presentment for payment, not mere delay under Section 81. Reasonable diligence exercised Reasonable diligence implies active search. In other words, the holder must take all steps likely to discover the whereabouts of the party whom presentment is to be made. An insolvency of the maker even if known to the indorser will not excuse presentment for payment. Where drawee is ficititious Reason for not requiring presentment – There is no one to whom presentment is to be made. Waiver Must be express or implied Implied waiver may be manifested by any language or conduct or agreement between the parties reasonably calculated to leas the holder to believe that presentment is waived or to mislead or prevent him from treating the bill as he otherwise would. Examples if implied waiver – 1. 2. 3. 4.
5.
6.
7.
Declarations, acts or conduct which mislead the holder and induce him from taking the necessary steps to make presentment. Drawer A tells holder F that he will take care of collecting the bill. Holder failed to make presentment to the drawee. Thereafter, the drawer paid part of the bill and promised orally t pay the rest. Where the maker, before maturity of the note, was willingly adjudged bankrupt partly upon his written admission of inability to pay the debts. Where the indorsers of a note payable at a bank has assured the holder that it could not be paid at maturity and knew that the maker, a corporation, had no money to pay for it. Where the indorser assured the holder before maturity of the note, that a note for the same amount with his indorsement will be given in renewal, such assurance, if relied by the holder. When the maker on the day of maturity of the note telephoned the holder that he could not then pay the note and the holder then telephoned the maker consenting in giving further time to the maker.
Summary of Rules as to Presentment for Payment 1.
Presentment for payment is not necessary to charge persons primarily liable.
2.
But presentment for payment to persons primarily liable is necessary to charge person secondarily liable except – a. As to drawer under Section 79; b. As to indorser under Section 80 c. When dispensed with under Section 82; and d. When the instrument has been dishonored by non-acceptance under Section 151
SECTION 83 – WHEN INSTRUMENT DISHONORED BY NONPAYMENT 1. 2.
It is duly presented for payment and payment is refused or cannot be obtained; or Presentment is excused and the instrument is overdue and unpaid
When payment refused, etc- requisites: 1. 2.
The instrument must be duly presented for payment; and Payment is either effused or cannot be ontained
Example: F holder makes presentment for payment to X, acceptor and X refuses to pay or F cannot obtain payment as although X is willing, he has no money to pay or he fails to pay on the date of maturity but promises to pay 5 days later. When presentment excused- requisites: 1. 2. 3.
Presentment for payment must be excused The instrument be overdue; and It is unpaid
Example: Supposes that presentment is waived and the bill is due on March 1, 1950. The bill is deemed dishonored when on March 2, 1950, it is not paid even f the holder did not make presentment. But if presentment is not excused, the bill is not dishonored by the mere fact that the bill is overdue and unpaid.
SECTION 84 – LIABILITY OF PERSON SECONDARILY LIABLE Rule: When the instrument is dishonored by non-payment, an immediate right of recourse to all parties secondarily liable thereon accrues to the holder. Reason: The persons secondarily liable on the instrument cease to be secondarily liable after dishonor of the instrument by non-payment. They become principal debtors and their liabilty is the same as the original obligors. Caveat: This is provided of course that notice of dishonor us given to them otherwise they are discharged from liability. The holder can then bring an action against any one of them without necessity of first bringing an action against the person primarily liable. But while they become principal debtors to the holder, as regards each other, they are presumed liable in the order they become parties to the instrument.
SECTION 85 – TIME OF MATURITY Rule: Every negotiable instrument is payable at the time fixed therein without grace. Payment where instrument payable at a fixed time Example: If the instrument is payable on June 16, 1950, presentment must be made on that date and no grace is to be granted.
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Q: When should presentment be made if June 16, 1950 falls on a Sunday or a holiday? A: It is payable on Monday or the succeeding business day. Presentment therefore must be made on that succeeding business day. Rule where the instrument is falling due or becoming payable on a Saturday Must 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 12 o’clock noon on Saturday when that entire day is not a holiday.
SECTION 88 – WHAT CONSTITUTE PAYMENT IN DUE COURSE 1. 2. 3.
Where payment is not considered payment in due course – 1.
Falling due on a Saturday, meaning -- When an instrument is payable on a Saturday, it is said to be falling due on a Saturday
2.
Becoming payable on a Saturday
3.
Example: Where a bill is payable on June 16, 1950, a Friday and if it is a holiday, the bill is said to have become payable on a Saturday When presentment is to be made where the instrument falls due on a Saturday or becomes payable on a Saturday 1.
2.
Payment must be made at or after the date of maturity Payment must be to the holder; and Payment must be made by the debtor in good faith and without notice that the holder’s title is defective
4.
Payment is made before maturity would constitute a negotiation back to the person primarily liable and he can renegotiate it. The payment does not discharge the instrument Payment to indorsee who is not in possession of the instrument is not payment in due course as he is not a holder Payment to the original payee after the note had been transferred by him to a holder in due course does not discharge the note as he is not a holder Payment to person by the debtor who knows such person stole it is not payment in due course as such payment is not in good faith.
Payment must be made to the possessor of the instrument
Where the instrument is payable on a fixed determinable future time – The presentment must be made on the next succeeding business day Where the instrument is payable on demand The presentment must be made on Saturday, June 17, 1950 before 12 noon or on Monday June 19, 1950, at the option of the holder
The party making payment must insist on the presentment in order to make sure that it is at the time in his possession and not outstanding in another. The possession of notes by the maker is presumptive evidence that the notes are paid. But the payee’s possession of the instrument raises the presumption that they are not paid. Medium of payment
SECTION 86 – TIME; HOW COMPUTED
1.
Rule: When instrument is payable at a fixed period after date, after sight or after the 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.
2.
Example: 1.
2.
A draws a bill dated March 1, 1950 thus: To X: 30 days from date, to pay B or order P1000 (Sgd) A. To compute the period, exclude March 1 then count 30 days and include the 30th day, March 31, 1950, the date of payment. If dated January 31 and payable one month after date, it will mature on February 28 or February 29, if a leap year.
Caveat: On the day of payment, the party liable is entitled to that whole day within which to make payment.
SECTION 87 – RULE WHERE INSTRUMENT IS PAYABLE AT BANK Rule: it is equivalent to an order of the bank to pay the same for the account of the principal debtor thereon. Application of Section 87 – this section applies only where instrument is payable to a particular bank
3.
Must be in the currency stipulated or if not possible, the currency which is legal tender in the Philippines Payment shall be effected only upon encashment of such instruments or if upon the fault of the creditor, they have been impaired. In case of extraordinary inflation or deflation of the currency stipulated, the value of the currency at the time of establishment of the obligation shall be the basis of payment unless there is an agreement to the contrary
Payment other than legal tender GR: Payment will not be considered absolute until the paper given in payment has been itself paid EXC: Where the parties expressly or impliedly agree that the claim shall be discharged by such payment. *Taking of a renewal note is not a payment of the original Payment through banks A bank to which a note is sent for collection is the agent of the owner. It is immaterial that the maker has requested the holder to send the note to this bank for collection. Crediting of account constitutes payment
Example: “I promise to pay to B or order P1000 at the PNB (Sgd) A.” PNB may charge the amount of the note from the account of A without any further authority from A. Effect of failure to make presentment for payment The better view seems to be that the maker is not discharged because he is primarily liable
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