G.R. No. L-36549 October 5, 1988
FAR EAST REALTY INVESTMENT INC., petitioner-appellant, vs. THE HONORABLE COURT OF APPEALS, DY HIAN TAT, SIY CHEE and GAW SUY AN, respondents-appellees.

FACTS

Petitioner Far East Realty Investment Inc. filed a complaint for collection against private respondents Dy Hian Tat, Siy Chee, and Gaw Suy An. The petitioner alleged that on September 13, 1960, the respondents obtained an accommodation loan of P4,500.00, promising to pay it in one month. As security, they delivered a China Banking Corporation check dated September 13, 1960, drawn by Dy Hian Tat and endorsed by the respondents. The petitioner claimed it was agreed the check could be presented for payment after one month. However, the check was only presented for payment on March 5, 1964, and it was dishonored because the drawer’s account was already closed. The City Court and the Court of First Instance of Manila ruled in favor of the petitioner, ordering the respondents to pay jointly and severally.
The private respondents contested their liability. Gaw Suy An claimed he signed the endorsement for his principal, Victory Hardware, and not in his personal capacity. Dy Hian Tat denied delivering the check to the petitioner, asserting it was originally issued to a different entity. Crucially, both argued that the petitioner’s delay of over three years in presenting the check for payment discharged them from liability as drawer and endorsers under the Negotiable Instruments Law.

ISSUE

Whether the petitioner’s delay in presenting the check for payment discharged the respondents from their liability on the instrument.

RULING

The Supreme Court denied the petition and affirmed the decision of the Court of Appeals, which had reversed the lower courts and dismissed the complaint. The legal logic centers on the petitioner’s failure to comply with the presentment requirements under the Negotiable Instruments Law. For a check, which is a demand instrument, presentment for payment must be made within a reasonable time after its issue to hold the drawer and endorsers liable. The Court found the delay of more than three years and five months—from the check’s date of September 13, 1960, to its presentment on March 5, 1964—to be patently unreasonable. Even granting the alleged one-month agreement, the presentment was still unreasonably delayed by several years.
This unreasonable delay operated as a discharge of the respondents from their liability. The law mandates such discharge to protect parties to negotiable instruments from undue prejudice caused by the holder’s negligence, which could affect their ability to recover from prior parties or preserve evidence. The petitioner offered no valid justification for the prolonged delay. Consequently, having failed to present the instrument within a reasonable time as required by Section 71 of the Negotiable Instruments Law, the petitioner lost its right of recourse against the drawer and the endorsers. The claim was therefore properly dismissed.