Atty. Jun De Zuñiga
This column has previously discussed crossed checks (27 June 2019) and second-endorsed checks (31 July 2019) and what will be covered now will be stale checks. Checks do become stale and there are legal implications when they become so. Let us go first to the definition: A stale check is one which is not presented for payment within a reasonable time after its issue. It is valueless and, therefore, should not be paid (International Corporate Bank vs. Spouses Gueco, G.R. No. 141968, Feb. 12, 2001).
The question is what constitutes “reasonable time” within which the check should be presented for payment. If that reasonable time expires, the check becomes stale and will no longer be accepted by the bank. Based on jurisprudence, no hard and fast demarcation line can be drawn between what may be considered as a reasonable or an unreasonable time because “reasonable time” depends upon the peculiar facts and circumstances in each case.
In determining what is a reasonable time, regard is to be had to the nature of the instrument, the usage of trade of business with respect to such instrument and the facts of the particular case. The test is whether the payee employed such diligence as a prudent man exercises in his own affairs. This is because the nature and theory behind the use of a check points to its immediate use and payability (International Corporate Bank, ibid).
In a case, a check payable on demand which was long overdue by about two and half years was considered a stale check. Failure of a payee to encash a check for more than ten years undoubtedly resulted in the check becoming stale. In addition, the right to collect on the check may have already prescribed. In another case, the Supreme Court referred to the banking practice which considers a check becoming stale after more than six (6) months (Pacheco, et. al. vs. Court of Appeals, et al., G.R. No. 126670, Dec. 02, 1999). Thus, holders of checks should make sure that these are presented within six (6) months from their due date. Banks carefully scrutinize checks being deposited with them because when they send the checks for clearing, there is an implied warranty from them that these are not “stale.” Once the bank classifies the check as stale, the bank will not accept it for deposit or for encashment.
What will then be the recourse of the payee of a stale check? Surely, he has not received payment and he should have a remedy. Under law and jurisprudence, failure to present the check on time does not totally wipe out the liability of the drawer although he can deduct from the amount of the check any loss suffered by him arising from the delay. In fact, the legal situation amounts to an acknowledgment of liability in the sum stated in the check. Definitely, the obligation of the drawer in favor of the payee has not been erased. The payee may request the drawer to issue a new and current check in his favor to replace the stale check or, if the drawer refuses and there has been no prescription, the payee can pursue a legal action to collect on the obligation of the drawer. This is an expensive and a cumbersome procedure so it is better to be vigilant in presenting the checks for payment at the earliest opportunity.
The above comments are the personal views of the writer. His email address is [email protected]