TL;DR

The Supreme Court ruled that debts backed by checks can expire if not acted upon within ten years from the check’s issuance. In this case, Benjamin Evangelista was acquitted of liability for dishonored checks issued over a decade prior. The Court emphasized that checks are subject to prescription like any written contract. If creditors delay encashing checks for an unreasonable time, especially beyond ten years, the debt can be considered paid due to prescription and the creditor’s negligence. This means creditors must act promptly to collect debts, or they risk losing their right to claim payment.

Time’s Ticking Checks: When Delay Means Debt Dismissed

Can a debt last forever? This case of Benjamin Evangelista v. Screenex, Inc. tackles the crucial question of how long a creditor has to collect on a debt secured by checks. Screenex, Inc. attempted to collect on loan obligations from Benjamin Evangelista dating back to 1991, presenting checks as evidence. The checks, initially undated, were deposited in 2004, more than ten years after their issuance. The central legal issue revolves around prescription – the legal concept that sets time limits on actions to enforce rights. Specifically, the Supreme Court examined whether the civil obligation related to these long-dormant checks had already prescribed, effectively extinguishing Evangelista’s liability.

The facts reveal that Evangelista received loans from Screenex in 1991, issuing two undated checks as security. These checks remained with Screenex’s representative until 2004, when dates were inserted, and they were deposited. When the checks bounced due to “account closed,” criminal charges for violation of Batas Pambansa Blg. 22 (BP 22), the Bouncing Checks Law, were filed against Evangelista. While the lower courts acquitted Evangelista of the criminal charges due to insufficient proof of notice of dishonor, they still ordered him to pay the civil obligation. Evangelista appealed, arguing that the civil liability was extinguished by prescription.

The Supreme Court sided with Evangelista, emphasizing that a check, as a negotiable instrument, is subject to the rules of prescription applicable to written contracts. Article 1144 of the Civil Code stipulates a ten-year prescriptive period for actions based on written contracts. The Court underscored that the prescriptive period for checks, even if undated, begins from the date of issuance, presumed by law to be the date of issuance as per Section 17 of the Negotiable Instruments Law.

Article 1144. The following actions must be brought within ten years from the time the right of action accrues:

1) Upon a written contract;

The Court noted that even if Screenex had authority to date the checks later, doing so after a decade was not within a “reasonable time” as required by Section 14 of the Negotiable Instruments Law. Crucially, no evidence of extrajudicial or judicial demand within the ten-year period was presented to interrupt prescription. Therefore, the Court concluded that the action to enforce the civil obligation had prescribed. This dismissal was even allowed despite prescription being raised late in the appeals process, as the Rules of Court permit courts to dismiss claims motu proprio (on their own initiative) when prescription is evident from the pleadings or record.

Furthermore, the Supreme Court addressed the effect of delayed presentment of checks for payment. Citing Article 1249 of the Civil Code and Section 186 of the Negotiable Instruments Law, the Court reiterated that checks must be presented for payment within a reasonable time. Unreasonable delay that impairs the check, especially exceeding ten years, can discharge the drawer’s liability. The Court referenced Papa v. Valencia, where a creditor’s ten-year delay in encashing a check was deemed unreasonable, effectively discharging the debt. In Evangelista, the prolonged delay by Screenex in presenting the checks similarly prejudiced their claim.

Art. 1249. …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.

The Court clarified that while possession of a debt instrument usually presumes non-payment, and checks are conditional payment until encashed, these principles are overridden by prescription and the creditor’s fault. Screenex’s inaction for over a decade constituted such fault, leading to the impairment of their right to collect. The ruling underscores the importance of timely action in debt collection, particularly when using checks as payment instruments. Creditors cannot indefinitely hold onto checks and expect to enforce them after the prescriptive period has lapsed or when their own delay has prejudiced the debtor.

FAQs

For inquiries regarding the application of this ruling to specific circumstances, please contact Atty. Gabriel Ablola through gaboogle.com or via email at connect@gaboogle.com.

Disclaimer: This analysis is provided for informational purposes only and does not constitute legal advice. For specific legal guidance tailored to your situation, please consult with a qualified attorney.
Source: Evangelista v. Screenex, Inc., G.R. No. 211564, November 20, 2017