Dishonored Negotiable Instruments
Sec. 83. When instrument dishonored by non-payment. - The instrument is dishonored by non-payment when:
(a) It is duly presented for payment 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 bank 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.
