International Corporate Bank v.

Spouses Gueco
February 12, 2001 | Kapunan, J. | Section 81 and 82 of NIL in relation to Art. 1249 of the
Civil Code

Petitioner: The International Corporate Bank (now UNION BANK of the

Respondent: Spouses Francis Gueco and Ma. Luz E. Gueco

Summary: The respondents obtained a loan from the petitioner to purchase a motor
vehicle (car). The respondents defaulted in payment of installments. A civil case was
filed by the petitioner which resulted later into negotiations in lowering the remaining
unpaid balance from P184,000.00 to P150,000.00, detaining the car until payment
thereof. Respondent delivered a manager’s check but petitioner insisted on the signing of
“Joint Motion to Dismiss”, still holding the motor vehicle. Respondent initiated civil
action for damages before MTC but the case was dismissed for lack of merit. On appeal
to RTC, the decision of MTC was reversed ordering herein petitioners to indemnify the
respondents. The Court of Appeals likewise affirmed the decision of the RTC.

Doctrine:

I. While it is true that the delivery of a check produces the effect of payment only
when it is cashed, pursuant to Art. 1249 of the Civil Code, the rule is otherwise if
the debtor is prejudiced by the creditor's unreasonable delay in presentment. The
acceptance of a check implies an undertaking of due diligence in presenting it for
payment, and if he from whom it is received sustains loss by want of such
diligence, it will be held to operate as actual payment of the debt or obligation for
which it was given.

II. If no presentment is made at all, the drawer cannot be held liable irrespective of
loss or injury unless presentment is otherwise excused. This is in harmony with
Article 1249 of the Civil Code under which payment by way of check or other
negotiable instrument is conditioned on its being cashed, except when through the
fault of the creditor, the instrument is impaired. The payee of a check would be a
creditor under this provision and if its no-payment is caused by his negligence,
payment will be deemed effected and the obligation for which the check was
given as conditional payment will be discharged.

III. A manager's check is one drawn by the bank's manager upon the bank itself. It is
similar to a cashier's check both as to effect and use. A cashier's check is a check
of the bank's cashier on his own or another check. In effect, it is a bill of exchange
drawn by the cashier of a bank upon the bank itself, and accepted in advance by
the act of its issuance. It is really the bank's own check and may be treated as a
promissory note with the bank as a maker. The check becomes the primary
obligation of the bank which issues it and constitutes its written promise to pay
upon demand. The mere issuance of it is considered an acceptance thereof. If
 treated as promissory note, the drawer would be the maker and in which case the
holder need not prove presentment for payment or present the bill to the drawee
for acceptance.

FACTS: The respondent Gueco Spouses obtained a loan from petitioner (now
UnionBank) to purchase a car. Hence, the Spouses executed promissory notes which
were payable in monthly installments and chattel mortgage over the car to serve as
security for the notes.

The Spouses defaulted in payment. The Bank, therefore, filed a civil action for "Sum of
Money with Prayer for a Writ of Replevin" before the MTC. The car was detained inside
the Bank’s compound.

Dr. Gueco delivered a manager's check in amount of P150,000.00 but the car was not
released because of his refusal to sign the Joint Motion to Dismiss for they had not yet
filed their Answer. The Bank insisted that the joint motion to dismiss is standard
operating procedure in their bank to effect a compromise and to preclude future filing of
claims, counterclaims or suits for damages.

After several demand letters and meetings with bank representatives, the spouses initiated
a civil action for damages. The RTC held that there was a meeting of the minds between
the parties as to the reduction of the amount of indebtedness and the release of the car but
said agreement did not include the signing of the joint motion to dismiss as a condition
sine qua non for the effectivity of the compromise.

ISSUE: Whether petitioner should return the car or its value and that the latter, because
of its own negligence, should suffer the loss occasioned by the fact that the check had
become stale.

RULING: No. A check must be presented for payment within a reasonable time after its
issue. In the case at bar, the check involved is a manager's check and is accepted in
advance by the act of issuance. Assuming that presentment is needed, failure to present
on time will result to the discharge of the drawer only to the extent of the loss caused by
the delay.

If a check had become stale, it becomes imperative that the circumstances that caused its
non-presentment be determined. In the case at bar, there is no doubt that the petitioner
bank held on the check and refused to encash the same because of the controversy
surrounding the signing of the joint motion to dismiss. The Court sees no bad faith or
negligence in this position taken by the Bank.

RATIO: While it is true that the delivery of a check produces the effect of payment only
when it is cashed, pursuant to Art. 1249 of the Civil Code, the rule is otherwise if the
debtor is prejudiced by the creditor’s unreasonable delay in presentment.
The acceptance of a check implies an undertaking of due diligence in presenting it for
payment, and if he from whom it is received sustains loss by want of such diligence, it
will be held to operate as actual payment of the debt or obligation for which it was given.
It has, likewise, been held that if no presentment is made at all, the drawer cannot be held
liable irrespective of loss or injury unless presentment is otherwise excused. This is in
harmony with Article 1249 of the Civil Code under which payment by way of check or
other negotiable instrument is conditioned on its being cashed, except when through the
fault of the creditor, the instrument is impaired.

The payee of a check would be a creditor under this provision and if its non-payment is
caused by his negligence, payment will be deemed effected and the obligation for which
the check was given as conditional payment will be discharged.