CD: Asian Banking Corp. v. Javier

September 22, 2010 at 3:49 pm (1923, Case Digests) (, , )

ASIAN BANKING CORPORATION v. JUAN JAVIER
G.R. No. L-19051 April 4, 1923
Avanceña, J.

Doctrine:
When a negotiable instrument is dishonored for non-acceptance or non-payment, notice thereof must be given to the drawer and each of the indorsers, and those who are not notified shall be discharged from liability, except as provided otherwise.

It is incumbent upon a person, who seeks to enforce the indorser’s liability, to establish said liability by proving that notice was within the time, and in the manner, required by the law.

Facts:
Salvador B. Chaves drew a check on the Philippine National Bank for P11,000 in favor of La Insular. This check was indorsed by the limited partners of La Insular, and then deposited by Salvador B. Chaves in his current account with the plaintiff, Asia Banking Corporation. Another check was drawn and deposited in similar fashion.

The amount represented by both checks was used by Salvador B. Chaves after they were deposited in the plaintiff bank, by drawing checks on the plaintiff. Subsequently these checks were presented by the plaintiff to the Philippine National Bank for payment, but the latter refused to pay on the ground that the drawer, Salvador B. Chaves, had no funds therein.

The lower court sentenced the defendant, as indorser, to pay the plaintiff P11,000. From this judgment the defendant appealed.

Issue:
Whether or not the defendant’s liability as an indorser is extinguished for lack of notice

Held:
Yes. Section 89 of the Negotiable Instruments Law (Act No. 2031) provides that, when a negotiable instrument is dishonored for non-acceptance or non-payment, notice thereof must be given to the drawer and each of the indorsers, and those who are not notified shall be discharged from liability, except where this act provides otherwise.

According to this, the indorsers are not liable unless they are notified that the document was dishonored. Then, under the general principle of the law of procedure, it will be incumbent upon the plaintiff, who seeks to enforce the defendant’s liability upon these checks as indorser, to establish said liability by proving that notice was given to the defendant within the time, and in the manner, required by the law that the checks in question had been dishonored. If these facts are not proven, the plaintiff has not sufficiently established the defendant’s liability. There is no proof in the record tending to show that plaintiff gave any notice whatsoever to the defendant that the checks in question had been dishonored, and there it has not established its cause of action.

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