Unreasonable Delay in Presenting a Check Can Constitute Payment

TLDR: In the Philippines, delivering a check for payment doesn’t automatically mean the debt is settled. However, if the creditor (payee) unreasonably delays cashing the check, and this delay prejudices the debtor (payer), the law considers the debt paid. This case clarifies the responsibility of payees to promptly present checks for payment.

G.R. No. 105188, January 23, 1998 (Myron C. Papa vs. A. U. Valencia and Co. Inc.)

Introduction

Imagine you’ve sold a property and received a check as payment. You hold onto the check, perhaps forgetting about it, for years. Can you still demand payment later? This scenario highlights the importance of understanding the legal implications of accepting checks as payment in the Philippines. The case of Myron C. Papa vs. A. U. Valencia and Co. Inc. sheds light on this issue, emphasizing the duty of a creditor to promptly present a check for payment.

This case revolves around a property sale where the buyer paid with a check. The seller, however, did not encash the check for over ten years. The central legal question is whether the delivery of the check constituted payment, even if it wasn’t cashed immediately.

Legal Context: Payment by Check and Delay

Philippine law, specifically Article 1249 of the Civil Code, addresses payment using negotiable instruments like checks. It states that the delivery of these instruments “shall produce the effect of payment only when they have been cashed, or when through the fault of the creditor they have been impaired.” This means that simply handing over a check doesn’t automatically settle a debt. The check must be converted into cash, or the creditor’s actions must negatively impact its value.

The key legal principle here is that the creditor has a responsibility to act diligently in presenting the check for payment. Unreasonable delay that prejudices the debtor can be considered a form of impairment, effectively discharging the debt.

“Art. 1249. The payment of debts in money shall be made in the currency stipulated, and if it is not possible to deliver such currency, then in the currency which is legal tender in the Philippines.

The delivery of promissory notes payable to order, or bills of exchange or other mercantile documents shall produce the effect of payment only when they have been cashed, or when through the fault of the creditor they have been impaired.

In the meantime, the action derived from the original obligation shall be held in abeyance.”

Case Breakdown: The Uncashed Check

Here’s a breakdown of the case:

• 1973: Myron C. Papa, acting as attorney-in-fact for Angela M. Butte, sold a property to Felix Peñarroyo, facilitated by A.U. Valencia and Co., Inc.
• Payment: Peñarroyo paid part of the purchase price in cash (P5,000) and the remainder with a check (P40,000).
• Dispute: Years later, a dispute arose because Papa allegedly never encashed the check.
• Lawsuit: Valencia and Peñarroyo sued Papa for specific performance, demanding the title to the property.
• Defense: Papa claimed he didn’t recall the transaction and hadn’t cashed the check.

The Regional Trial Court ruled in favor of Valencia and Peñarroyo, ordering Papa to execute the deed of sale. Papa appealed, arguing the sale wasn’t consummated since the check wasn’t cashed.

The Court of Appeals affirmed the trial court’s decision, emphasizing that Papa provided no evidence that he did not encash the check. The Supreme Court upheld the Court of Appeals’ ruling, stating that:

“After more than ten (10) years from the payment in part by cash and in part by check, the presumption is that the check had been encashed. As already stated, he even waived the presentation of oral evidence.”

Furthermore, the Supreme Court added:

“Granting that petitioner had never encashed the check, his failure to do so for more than ten (10) years undoubtedly resulted in the impairment of the check through his unreasonable and unexplained delay.”

The Court emphasized the payee’s (Papa’s) responsibility to present the check promptly. His failure to do so prejudiced the payor (Valencia and Peñarroyo), effectively constituting payment.

Practical Implications: Protecting Your Rights

This case provides crucial guidance for both payers and payees when dealing with checks:

• For Payees (Creditors): Deposit checks promptly. Delay can prejudice your rights to collect the debt.
• For Payers (Debtors): Keep records of issued checks and their purpose. If a check isn’t presented for payment within a reasonable time, consult with a lawyer.

The Papa vs. Valencia case highlights the legal principle that a creditor cannot sit on a check indefinitely and then claim non-payment. The law imposes a duty of diligence, and failure to act reasonably can have significant consequences.

Key Lessons

• Prompt Presentment: Payees must present checks for payment promptly.
• Impairment: Unreasonable delay that prejudices the payer constitutes impairment of the check.
• Presumption of Payment: After a significant delay, there’s a presumption that the check was encashed.

Frequently Asked Questions

Q: What happens if a check bounces?

A: If a check bounces due to insufficient funds, the debt is generally not considered paid. The creditor can pursue legal action to collect the debt, plus any penalties or damages.

Q: How long is a check valid in the Philippines?

A: Under Philippine law, a check must be presented for payment within six (6) months from its date. After this period, the bank may refuse to honor the check.

Q: What constitutes “unreasonable delay” in presenting a check?

A: What is considered unreasonable depends on the specific circumstances. However, a delay of several years, as in the Papa vs. Valencia case, is almost certainly unreasonable.

Q: What evidence can a payer use to prove they issued a check for payment?

A: Evidence can include the check itself (if available), bank statements showing the debit, receipts issued by the payee, and witness testimony.

Q: Can a creditor refuse to accept a check as payment?

A: Yes, unless there is a prior agreement to accept checks, a creditor can demand payment in legal tender (cash). However, refusing a check may be impractical in many situations.

Q: What is specific performance?

A: Specific performance is a legal remedy where a court orders a party to fulfill their obligations under a contract. In the Papa vs. Valencia case, the court ordered Papa to deliver the title to the property, fulfilling his end of the sale agreement.

ASG Law specializes in contract law and property disputes. Contact us or email hello@asglawpartners.com to schedule a consultation.