Evangelista vs. Screenex, Inc.

In an action to enforce civil liability based on undated checks issued as security for a loan, the prescriptive period under Article 1144 of the Civil Code commences from the date of issuance of the checks (applying Section 17 of the Negotiable Instruments Law), not from the date later inserted by the holder. Moreover, a debtor is discharged from liability when the creditor unreasonably delays presentment for payment for more than ten years, as the delivery of a check produces the effect of payment only when cashed, unless the instrument is impaired through the fault of the creditor.

In 1991, Benjamin Evangelista obtained a loan totaling P1,500,000 from Screenex, Inc., evidenced by two checks issued by the company to Evangelista. As security for the loan, Evangelista issued two open-dated checks (UCPB Check Nos. 616656 and 616657) payable to Screenex, Inc. These checks were held in safekeeping by Philip Gotuaco, Sr., father-in-law of respondent Alexander G. Yu, until Gotuaco's death on November 19, 2004. Following Gotuaco's death, the checks were dated December 22, 2004, and presented for payment, but were dishonored by the drawee bank with the notation "ACCOUNT CLOSED."

• In 1991, petitioner Benjamin Evangelista obtained a loan from respondent Screenex, Inc., evidenced by two checks issued by the company to Evangelista totaling P1,500,000 (UCPB Check No. 275345 for P1,000,000 and China Banking Corporation Check No. BDO 8159110 for P500,000).
• As security for the loan, Evangelista issued two open-dated checks (UCPB Check Nos. 616656 and 616657) payable to Screenex, Inc.
• These security checks were held in safekeeping by Philip Gotuaco, Sr., father-in-law of respondent Alexander G. Yu, until Gotuaco's death on November 19, 2004.
• Before the checks were deposited, personal demands and a demand letter from the family lawyer were allegedly made upon Evangelista to settle the loan, though receipt of the demand letter was not proven.
• On December 22, 2004, the previously undated checks were filled with the date "12-22-04" and were subsequently deposited.
• The checks were dishonored by the drawee bank with the notation "ACCOUNT CLOSED."
• On August 25, 2005, two Informations for violation of Batas Pambansa Blg. 22 were filed against Evangelista before the MeTC of Makati City.
• Evangelista pleaded not guilty and claimed that he had fully paid the loan obligation in 1992, though he failed to present evidence of such payment.
• The MeTC acquitted Evangelista of the criminal charges but held him civilly liable for P1,500,000 with 12% interest per annum.
• The RTC and CA affirmed the civil liability, rejecting Evangelista's defense of prescription by ruling that the prescriptive period was reckoned from December 22, 2004 (the date inserted on the checks).

• The prosecution failed to prove his civil liability to the private complainant.
• Any civil liability attributable to him had been extinguished and/or was barred by prescription.
• The insertion of the date on the checks without his knowledge constituted a material alteration that avoided the checks.
• The obligation had already been paid in 1992.
• The reckoning time for prescription should be from the issuance of the checks in 1991, making the action time-barred by 2005.

• The date of prescription should be reckoned from December 22, 2004 (the date inserted on the checks), making the August 2005 filing well within the 10-year prescriptive period under Article 1144 of the New Civil Code.
• Witness Alexander G. Yu was competent to testify based on his personal dealings with his father-in-law regarding the loan transaction.
• The writing of the date on the checks cannot be considered a material alteration because the checks were undated; there was nothing to change.
• Evangelista failed to present proof of payment despite claiming under oath that the loan was paid in 1992.
• The defense of prescription was raised for the first time on appeal and should be deemed waived.

• Procedural Issues: Whether the defense of prescription, raised for the first time on appeal, may be considered by the court when the pleadings and evidence on record indubitably establish that the action has already prescribed.
• Substantive Issues:
  • Whether the civil action based on the checks has prescribed.
  • Whether the insertion of dates on the previously undated checks affects the reckoning of the prescriptive period.
  • Whether the unreasonable delay in presenting the checks for payment discharges the obligor from liability.

• Procedural: The Supreme Court held that while the defense of prescription was belatedly raised before the RTC for the first time on appeal from the MeTC, the Court may nonetheless dismiss the complaint when it appears from the pleadings or the evidence on record that the action is barred by the statute of limitations, pursuant to Section 1 of Rule 9 of the Rules of Court. The Court ruled that prescription allows the court to dismiss the case motu proprio.
• Substantive: The civil action based on the checks has prescribed. For undated checks, the cause of action is reckoned from the date of issuance (1991), applying Section 17 of the Negotiable Instruments Law which presumes an undated instrument to be dated as of the time it was issued. Since the action was filed in 2005, more than ten years had elapsed. The insertion of the date "12-22-04" by the holder after more than ten years from issuance (1991) cannot be considered as having been done within a "reasonable time" as required by Section 14 of the Negotiable Instruments Law. Under Article 1249 of the Civil Code and Section 186 of the Negotiable Instruments Law, the delivery of a check produces the effect of payment only when it is cashed, unless through the fault of the creditor the instrument is impaired. The failure to encash the checks within a reasonable time (more than ten years in this case) resulted in the checks becoming stale and the obligation being deemed fulfilled by operation of law. The unreasonable and unexplained delay prejudiced the drawer, effectively discharging the obligation.

• Prescription of Actions Based on Undated Checks — For purposes of prescription under Article 1144(1) of the Civil Code (actions upon written contracts), the cause of action based on an undated check is reckoned from the date of issuance, not from the date later inserted by the holder, pursuant to Section 17 of the Negotiable Instruments Law which presumes an undated instrument to be dated as of the time it was issued.
• Discharge of Obligation by Delay in Presentment — Under Article 1249 of the Civil Code and Section 186 of the Negotiable Instruments Law, a check must be presented for payment within a reasonable time. If the creditor unreasonably delays presentment for more than ten years, the debtor is discharged from liability to the extent of the loss caused by the delay, and the obligation is deemed fulfilled by operation of law.
• Independent Civil Action in BP 22 Cases — The civil action deemed instituted with the criminal action for violation of BP 22 is treated as an independent civil liability based on contract, which is subject to the rules on prescription and discharge of simple contracts for the payment of money.

• "A check therefore is subject to prescription of actions upon a written contract."
• "Barring any extrajudicial or judicial demand that may toll the 10-year prescription period and any evidence which may indicate any other time when the obligation to pay is due, the cause of action based on a check is reckoned from the date indicated on the check. If the check is undated, however, as in the present petition, the cause of action is reckoned from the date of the issuance of the check."
• "The failure to encash the checks within a reasonable time after issue, or more than 10 years in this instance, not only results in the checks becoming stale but also in the obligation to pay being deemed fulfilled by operation of law."
• "The acceptance of a check implies an undertaking of due diligence in presenting it for payment, and if he from whom it is received sustains loss by want of such diligence, it will be held to operate as actual payment of the debt or obligation for which it was given."

• Papa v. Valencia — Cited as controlling precedent establishing that if the creditor unreasonably delays encashing a check for more than ten years, the check is impaired through the creditor's fault, resulting in the discharge of the obligation.
• BPI v. Spouses Royeca — Cited for the principle that a negotiable instrument is only a substitute for money and not money itself, and that the obligation subsists until payment by commercial document is actually realized, unless discharged by unreasonable delay.
• Hyatt Industrial Manufacturing Corp. v. Asia Dynamic Electrix Corp. — Cited for the rationale behind the rule that civil action for violation of BP 22 is deemed instituted with the criminal action to discourage multiplicity of suits.
• Bernardo v. People — Cited for the principle that the civil action deemed instituted with the criminal action is treated as an independent civil liability based on contract.
• Spouses Agner v. BPI Family Savings Bank — Cited for the rule that the creditor's possession of the evidence of debt is proof that the debt has not been discharged by payment.

• Article 1144, New Civil Code — Establishes the 10-year prescriptive period for actions upon written contracts, upon obligations created by law, and upon judgments.
• Article 1249, New Civil Code — Provides that delivery of promissory notes, bills of exchange, or other mercantile documents produces the effect of payment only when cashed, or when through the fault of the creditor they have been impaired; in the meantime, the action derived from the original obligation is held in abeyance.
• Section 1, Rule 9, Rules of Court — Provides that when it appears from the pleadings or evidence that the action is barred by statute of limitations, the court shall dismiss the claim even if the defense was not pleaded.
• Section 14, Negotiable Instruments Law — Governs the filling of blanks in negotiable instruments, requiring that completion must be strictly in accordance with the authority given and within a reasonable time.
• Section 17(c), Negotiable Instruments Law — Provides that where the instrument is not dated, it will be considered to be dated as of the time it was issued.
• Section 119(d), Negotiable Instruments Law — States that a negotiable instrument is discharged by any other act which will discharge a simple contract for the payment of money.
• Section 186, Negotiable Instruments Law — Mandates that a check must be presented for payment within a reasonable time after its issue or the drawer will be discharged from liability thereon to the extent of the loss caused by the delay.