FAR EAST REALITY INVESTMENT INCO v CA, Dy Tat, Siy Chee and Gaw An

5 October 1988
FACTS:
1. Private Respondents (Tat, Chee and An) asked FERI ( September 13, 1960)
to extend to them an accommodation loan in the amount of PHP 4, 500 for
their business which they will pay solidarily after one month with interest
rate of 14% per annum.
2. Dy Hian Tat in view of the accommodation loan drew a China Bank check
signed by the private respondents at the back with the assurance that after
1 month the check would be redeemed by them or can be presented for
payment after one month.
3. FERI then extended the accommodation loan accepting the conditions
proposed by the private respondents.
4. The check was presented to China Bank for payment but it was dishonored
for the ground that the current account of the drawer was already closed.
5. FERI demanded payment but the private respondents refused.
6. FERI then filed a case against private respondents for collection and
payment of the value of the check.
7. Gaw An denied the material allegations
o FERI had no cause of action against him because he signed the
endorsement for Victory Hardware (his principal) and not for his own
individual account.
o He had been wholly discharged by delay in presentment of the check for
payment.
8. Dy Tats Contention:
o Private respondents never approached FERI for an accommodation
loan because the check was delivered by him to Sin Chin Juat Grocery
and not to FERI.
o The China Bank check was supposed to be delivered to Asian Surety
and Insurance Co to be applied to the indebtness of the Victory
Hardware.
o FERI for not being a holder for value has no recourse against him.
o There is an unreasonable delay in the presentment for payment
( Virtue of the conditions to FERI: the check should be presented for
payment on November 13 1960)
9. City Court of Manila rendered decision in favor of FERI
10. CFI affirmed lower courts decisopn.
o Heard the case de novo for lack of transcript of stenographic notes.
11. CAs reveres CFIs decision:
o China Bank check was not given as collateral to guarantee a loan but
passed through other hands before reaching FERI.
o Check not presented within reasonable time.
12. Hence this petition:
o Petitioners contention:
o That presentment for payment is not required in order to
charge the drawer and that notice of dishonor is not required
to be given to the drawer where he has no right to expect or
require that the drawee or acceptor will pay or honor the
instrument.
o When funds are insufficient to cover the check, the drawer is
liable.
o HOWEVER, in a situation where presentment and notice of
dishonor should be made without unreasonable delay, the

drawe is discharged pro tanto or up to the loss suffered by

reason of delay.
o In the case at bar, the drawer did not presented evidence that
will show loss.
Private respondents contention
o The check was drawn by Dy Kim son of Dy Tat and delivered to
the Shin Chin grocery in payment of grocery goods for
Goodyear Lumber and not to the FERI.
o Check was not delivered directly to FERI in exchange of Php
4500. The check in exchange of the 4500 could not be
considered a consideration for FERI to become a holder for
value. Hence, FERI is not a holder for value and due course.
o In order to charge the drawer and persons secondary liable,
the check must be presented for payment within the date
mention in the instrument if its payable on a fixed date or
within reasonable time otherwise, the drawer and insdorsers
are discharged from liability.

ISSUE: WHETHER OR NOT THE PRESENTMENT FOR PAYMENT AND NOTICE OF

DISHONOR WERE MADE WITHIN REASONABLE TIME:
HELD: NO. PRESENTMENT AND NOTICE OF DISHONOR WAS NOT MADE
WITHIN REASONABLE TIME.
A. RULES REGARDING PRESENTMENT AND NOTICE:
1. When instrument payable on demand:
o Presentment must be made within reasonable time after issue except
for bills of exchange, presentment for payment will be sufficient if it is
made within reasonable time after the last negotiation
2. When the instrument is not payable on demand,
o Presentment must be made on the day it falls due. Notice may be
given as soon as the instrument is dishonored and unless delay is
excused must be given within the lime fixed by law.
3. Reasonable Time has been defined as so much time as is necessary under
the circumstances for a reasonable prudent and diligent man to do,
conveniently, what the contract or duty requires should be done, having a
regard for the rights and possibility of loss to the other party.
A. In the case at bar, after dishonor by the drawee bank, (March 5, 1964) a
formal notice of dishonor was made only on April 27 1968.
Under these circumstance, FERI failed to exercise prudence and diligence required
by the law. Hence, private respondents should be discharged