PNB v.

SEETO (2) CA erred in not admitting parol evidence to

G.R. No. L-4388 | August 13, 1952 show that Seeto made oral assurances to
refund the value of the check in case of
Petitioner: Philippine National Bank dishonor.
Respondent: Benito Seeto
PROCEDURAL HISTORY:
Ponente: Labrador, J. COURT OF FIRST INSTANCE. In favor of PNB.
Held that respondent made an undertaking to refund
FACTS: *Note: Dates are important in this case. the amount of the check in the event of dishonor. In
DATE EVENT support of this, it held that since the drawee bank is
March 10, 1948 Indicated date on the check not in Cebu, it was impossible for PNB’s agency to
Benito Seeto called at the PNB Surigao make an immediate verification of the drawer’s
branch presenting Check No. A-20196
with the following details: solvency & must have taken precautions to protect
- In the amount of P5,000 itself against loss by requiring Seeto to give
- Dated at Cebu on March 10, assurances. The lower court also found no
1948;
- Payable to cash or bearer;
unreasonable delay in the presentation of the check.
- Drawn by one Gan Yek
March 13, 1948
Kiao against Philippine COURT OF APPEALS. In favor of Seeto. Reversed
Bank of Communications- the decision of the lower court. PNB was guilty of
Cebu
Seeto made a general & unqualified unreasonably retaining and withholding the check and
indorsement of the check. PNB’s the delay in the presentment of payment is
agency thereafter accepted the check inexcusable. Hence, Seeto was discharged from
and paid Seeto the amount of the
check.
liability. Moreover, parol evidence is incompetent to
March 20, 1948 Check was mailed to PNB Cebu. show that one signing a check as indorser is merely a
Check was presented to the drawee surety or guarantor, rejecting the evidence adduced at
April 9, 1948 bank for payment but was dishonored the trial court about Seeto’s assurances and promise
for “insufficient funds”.
to refund it.
PNB Surigao received the returned
April 14, 1948 check & immediately sent a letter to
Seeto demanding a refund. SUPREME COURT. In favor of Seeto. Affirmed the
PNB Surigao sent a second decision of the Court of Appeals. There was an
communication to Seeto. Seeto
requested that the contemplated legal
unreasonable delay that discharged Seeto from
April 26, 1948 liability. Sections 143 & 144 of the NIL are not
suit be deferred while he make inquiries
as to the reasons why the check was applicable in contrary to PNB’s claim. Parol evidence
dishonored. should be admissible.
PNB Surigao presented a complaint alleging that ISSUES:
Seeto gave them assurances that the drawer of the 1. Whether or not Sections 143 & 144 of the NIL are
check had sufficient funds with the drawee bank, and applicable in the case at bar? (NO)
upon these assurances, PNB’s agency delivered the 2. Whether or not there was an unreasonable delay
P5,000 to the Seeto after the latter had made a on the part of PNB which discharges Seeto from
general and unqualified indorsement thereto. liability? (YES)
3. Whether or not the parol evidence showing that
PNB submitted two (2) witnesses at the time of the Benito Seeto made oral assurances to refund the
trial, testifying that it was not the practice of PNB’s value of the check in case of dishonor should be
agency to cash out of town checks, and that the admissible? (YES)
check was only cashed because of Seeto’s
assurances that he would refund the amount paid by HELD:
PNB’s agency in case the check is dishonored. 1. NO, Sections 143 & 144 of the NIL are not
applicable because these provisions are
Seeto refused to refund the check, claiming that at the regarding the presentation of a bill of exchange
time of the negotiation, the drawer had sufficient for acceptance, not applicable to a check. A
funds in the drawee bank, and that had the agency of check does not require a presentation for
PNB Surigao not delayed to forward the check until acceptance.
the drawer’s funds were exhausted, the same would
have been paid. Seeto denies that he made the The applicable law is Section 84, subject to the
alleged assurances. condition imposed by Section 186 of the NIL,
that the check must be presented for payment
This appeal by certiorari alleges two (2) assignments within a reasonable time after its issue. To wit:
of error:
(1) CA erred in applying Sections 143 & 144 of Section 84. Liability of person
the NIL declaring Seeto discharged of his secondarily liable, when
instrument is dishonored. –
liability as indorser of the check; Subject to the provisions of this
 Act, when the instrument is 2. YES, there was an unreasonable delay on the
dishonored by nonpayment, an
immediate right of recourse to all
part of PNB which discharges Seeto from liability
parties secondarily liable thereon since Section 84 in relation to Section 186 of the
accrues to the holder. NIL requires that the check must be presented
within a reasonable time, otherwise the
Section 186. Within what time a
check must be presented. – A drawer/indorser will be discharged from liability.
check must be presented for
payment within a reasonable time PNB concedes that there was indeed a delay,
after its issue or the drawer will
be discharged from liability
although for purposes of argument only.
thereon to the extent of the loss
caused by the delay. Admitted by PNB’s witnesses, the checks of the
drawer issued subsequent to March 13, 1948,
Note that Section 186 talks of drawer, not drawn against the same bank & cashed at the
indorser. Hence, PNB was alleging that under the same Surigao agency were not dishonored.
general principle of inclusion unius est exclusion Hence, it shows that the drawer had enough
alterius, the indorser cannot be discharged from funds when he issued the check in question.
liability as the law only speaks on the drawer.
Had it not been for the unreasonable delay in its
The Court held that the silence of Section 186 as presentation for payment, PNB would have been
to indorser is due to the fact that his discharge is able to receive payment thereof.
already covered by Section 84, the indorser (1) The check dated March 10 was cashed
being a person only secondarily liable on the by PNB’s agency on March 13.
instrument. (2) It was not mailed until a week after, on
March 20, or ten days after its issue.
Moreover, this requirement of “presentment in (3) Assuming that it took a week, or say, 10
due time” is only in accordance with the essential days until it reached Cebu or on March
nature & character of negotiable instruments— 30, PNB is not excused for not
their negotiability. They are supposed to be presenting the check for payment at the
passed on with promptness in the ordinary drawee bank 10 days after it reached
course of business transactions; not to be Cebu on April 9, 1948.
retained or kept for such time as the holder may Hence, there was an unreasonable delay in
want, otherwise the smooth flow of commercial the presentation of the check for payment at
transactions would be hindered. the drawee bank, and as a consequence
thereof, Seeto, the indorser was thereby
DIFFERENCE BETWEEN THE LIABILITY OF discharged.
INDORSER & DRAWER IN CASE OF
DISHONOR. 3. YES, the parol evidence showing that Seeto
DRAWER INDORSER made verbal assurances should be admissible as
Actually or by legal it is an exception to the parol evidence rule.
Not probably prejudiced
presumption prejudiced
thereby.
thereby.
Discharged only to the Indorser is WHOLLY Seeto’s assurance that he was ready to refund
extent of loss caused by discharged irrespective of the amount if the check should be dishonored by
unreasonable delay in any questions of loss or the drawee bank is a collateral agreement,
presentment. injury.
separate & distinct from the indorsement by
virtue of which PNB was induced to cash the
Summarizing the several American jurisprudence
check. Thus, it is admissible as an exception to
cited by the Court:
the parol evidence rule.
(1) The law presumes that an indorser has
been prejudiced with the unreasonable
The Court cited several jurisprudences when
delay.
parol evidence is admissible:
(2) “Present in due time” was a condition
(1) To show that parties signing as
fixed by the law merchant and only
principals merely did so as sureties.
when there is an affirmative proof that
(Tan Machan v. De La Trinidad)
the indorser knew when he cashed the
(2) To prove an “independent or collateral
check that there would be no funds in
agreement which constituted an
the bank to meet it can the rule be
inducement to the making of the sale or
avoided.
part of the consideration thereof.”
(3) Otherwise, the failure to present the
(Robles v. Lizarraga Hermanos)
check in due course for payment will
(3) To any prior or contemporaneous
discharge the indorser, even though
conversation in connection with a note
such presentment would have been
or its indorsement (Philips v. Preston)
unavailing.
 (4) To an extrinsic agreement between (c) Where the bill is drawn payable elsewhere
indorser & indorsee which cannot be than at the residence or place of business of
embodied in the instrument impairing its the drawee.
credit (Wigmore) In no other case is presentment for acceptance
necessary in order to render any party to the bill
Thus, if the supposed assurances were the liable.
considerations that induced PNB’s agency to go
out of its ordinary practice of not cashing out of SECTION 144. When failure to present releases
town checks & in accepting the same to pay its drawer and indorser. — Except as herein otherwise
value, then the same should be provable by parol provided, the holder of a bill which is required by the
evidence provided they do not vary, alter, or next preceding section to be presented for
destroy the obligations attached by law to the acceptance must either present it for acceptance or
indorsement. negotiate it within a reasonable time.   If he fails to do
so, the drawer and all indorsers are discharged.
HOWEVER, the supposed assurances of refund
are precisely the ordinary obligations of an
indorser and these obligations, under the law
are considered discharged by unreasonable
delay in the presentation of the check for
payment.

Section 66. Liability of general

indorser. – x x x and, in addition,
he engages that on due
presentment, it shall be accepted
or paid or both as the case may
be, according to its tenor and that
if it be dishonored, and the
necessary proceedings thereof on
dishonor be duly taken, he will
pay the amount hereof to the
holder, or to any subsequent
indorser who may be compelled
to pay it.

In this case, there was no express obligation

assumed by Seeto that the drawer would always
have funds and that he would refund the amount
even if there was delay in its presentation.

Hence, even if the Court of Appeals may have

committed an error disregarding the parol
evidence, such error was without prejudice
because the supposed assurances given
were part of Seeto’s obligations as an
indorser, which were discharged by PNB’s
unreasonable delay in the presentation of the
check for payment.

DISPOSITION:
The judgment appealed from, is therefore,
AFFIRMED, with costs against PNB.

NOTES:
SECTION 143. When presentment for acceptance
must be made. — Presentment for acceptance must
be made—
(a) Where the bill is payable after sight, or in any
other case, where presentment for
acceptance is necessary in order to fix the
maturity of the instrument; or
(b) Where the bill expressly stipulates that it shall
be presented for acceptance; or