Negotiable Instruments Law

GENERAL PRINCIPLES

A. THEORY

01. What are the requisites of a negotiable instruments? [1953, 1954, 1964, 1968, 1989, 1991, 1996, Bar
Examinations].
02. What constitutes a holder in due course? [1996, Bar Examinations].
03. Can a bill of exchange or a promissory note qualify as a negotiable instrument if -
1. It is not dated; or = Yes. Date is not a material particular required by Sec 1 NIL for the negotiability of
an instrument
2. The date and the month, but not the year of its maturity is given; or= No. The time for payment is not
determinable in this case. The year is not stated
3. It is payable to cash; or = Yes. Sec 9d NIL makes the instrument payable to bearer because the name of
the payee does not purport to be the name of any person.
4. It names two alternativee drawees [1997, Bar Examinations]. = A bill may not be addressed to two or
more drawees in the alternative or in succession, to be negotiable (Sec 128 NIL). To do so makes the
order conditional
04. A promissory note reads as follows: I promise to pay Gabriela Silangan P1,000.00 three years after the
unconditional withdrawal of the U.S. of its military bases in the Philippines. Discuss the negotiability
or non-negotiability of the note above [1966 Bar Examinations].
05. Can the payee in a promissory note be a holder in due course within the meaning of the Negotiable
Instruments Law? [2000 Bar Examinations].
06. How do you treat a negotiable instrument that is so ambiguous that there is a doubt whether it is a bill or a
note? [1999, Bar Examinations].
Where a negotiable instrument is so ambiguous that there is. doubt whether it is a bill or a note, the holder may
treat it either as a bill of exchange or a promissory note at his election
07. When a signature is so placed upon a negotiable instrument that it is not clear in what capacity the person
making the same intended to sign, what is his liability? [1946, Bar Examinations].
08. When a negotiable instrument contains the words I promise to pay and is signed by two or more persons,
what is their liability, joint or solidary? Explain [1946, Bar Examinations].


B. TESTS OF NEGOTIABILITY

09. MP bought a used cellphone from JR. JR preferred cash but MP is a friend so JR accepted MPs promissory
note for P10,000.00. JR though of converting the note into cash by indorsing it to his brother KR. The
promissory note is a piece of paper with the following hand-printed notation: MP WILL PAY JR
P10,000.00 IN PAYMENT FOR HIS CELLPHONE ONE WEEK FROM TODAY. Below this
notation is MPs signature with 8/1/00 next to it, indicating the date of the promissory note. When JR
presented MPs note to KR, the latter said it was not a negotiable instrument under the law and so could
not be a valid cash substitute. JR took the opposite view, insisting on the notes negotiability. You are
asked to referee . Which of the opposing views is correct? Explain [2000 Bar Examinations].
a) KR is right. The promissory note is not negotiable. It is not issued to order or bearer. There is no word of
negotiability containing therein. It is not issued in accordance with Section 1 of the Negotiable Instruments Law

10. Perla bought a motor car payable in installments from Automotic Company for P250,000.00 with
a P50,000.00 downpayment. She executed a promissory note for the balance which reads:

For value received, I promise to pay Automotive Company or order at its office in
Legaspi City, the sum of P200,000.00 with interest at 12% per annum, payable in equal
installments of P20,000.00 for ten (10) months starting 21 October 2002.
SGD Perla
Manila, 21 September 2002

Automotive Company subsequently indorsed the note to Reliable Finance Corporation which financed
the purchase. Perla defaulted in the payment of her installments. Is the above promissory note a
negotiable instrument? Explain [1992 Bar Examinations].
a) The promissory note in the problem is a negotiable instrument, being in compliance with the provisions of
Sec 1 NIL. Neither the fact that the payable sum is to be paid with interest nor that the maturities are in stated
installments renders uncertain the amount payable (Sec 2 NIL)
b. ) Yes, Reliable Finance Corporation is a holder in due course given the factual settings. Said corporation
apparently took the promissory note for value, and there are no indications that it acquired it in bad faith (Sec 52
NIL see Salas v CA 181 s 296

11. Romeo had P100,000.00 in his current account at Matatag Banking Corporation. Romeo learned that his
enemy had hired a contract killer to liquidate him. Fearful of his life, he mailed to his fiance, Juliet, a
check for his P100,000.00 in the bank. The check was payable to Juliet or order and was accompanied
by a letter stating that he was giving her his money out of his great love for her and because something
would happen to him anytime now. Juliet presented the check for payment but the bank refused to honor
it. Does Juliet have any right of action against the bank? Because of the humiliation she suffered from
the bank, Juliet broke off her engagement with Romeo. Does Romeo have a right of action against the
bank? Explain [1986 Bar Examination].

12. Explain whether or not the following instrument is negotiable.

P1,000.00 Manila, October 5, 1970
I acknowledge to have received from Jose Cruz one thousand pesos (P1,000.00) which I
promise to pay on demand or in five months from date with one percent interest per
month payable within the first five days of every month. If the interest is not paid when
due, then both principal and interest shall become due at the option of the holder.
SGD: Pedro Garcia
[1970 Bar Examination].

13. For value received, X executed a promissory note in favor of Y for P10,000.00 agreeing to pay interest
thereon but without specifying the rate thereof. Can Y collect interest on the note? Why? Explain [1964
Bar Examination].








DEFENSES

C. FAILURE/ABSENCE OF CONSIDERATION

14. In payment of canned goods he had purchased, Pedro Flores of Cabanatuan drew a check upon PNB for
P1,000.00 payable to the order of Veraz and Co., the seller in Manila. He sent the check without
recourse to Juan Santos. The latter indorsed it in blank, for consideration, to Pablo Reyes, who, in turn,
sold it for P800.00, by delivery to Antonio Gomez. The canned goods were never forwarded to Flores.
Gomez presented the check to the bank, but payment was refused because Reyes had not put his name
on it. Is the bank right in so refusing? Why? If Gomez gave due notice to Veraz and Co., may he recover
from the latter? May Gomez recover from Santos? Why? May he recover from Reyes? Why? [1968 Bar
Examination].

15. Eva issued to Imelda a check in the amount of P50,000.00 post-dated September 19, as security for a
diamond ring to be sold on commission. On September 15, Imelda negotiated the check to MT
Investment which paid the amount of P40,000.00 to her. Eva failed to sell the ring, so she returned it to
Imelda on September 19. Unable to retrieve her check, Eva withdrew her funds from the drawee bank.
Thus, when MT Investment presented the check for payment, the drawee bank dishonored it. Later on,
when MT Investment sued her, Eva raised the defense of absence of consideration, the check having
been issued merely as security for the ring that she could not sell. Does Eva have a valid defense?
Explain [1996, Bar Examination].
\No. Eva does not have a valid defense. First, MT Investment is a holder in due course and, as such, holds the
postdated check free from any defect of title of prior parties and from defenses available to prior parties
among themselves. Eva can invoke the defense of absence of consideration against MT Investment only
if the latter was privy to the purpose for which the checks were issued and, therefore, not a holder in due
course. Second, it is not a ground for the discharge of the postdated check as against a holder in due
course that it was issued merely as security. The only grounds for the discharge of negotiable
instruments are those set forth in Sec 119 of the NIL and none of those grounds are available to Eva.
The latter may not unilaterally discharge herself from her liability by the mere expediency of
withdrawing her funds from the drawee bank

16. A and B executed and delivered to C a promissory note which reads: I promise to pay C or bearer
the sum of P2,000.00 with interest at 12% per annum on or before June 30, 1960. Manila,
February 1, 1969. SGD A and B. Two months later, for value received, C delivered to D the
aforesaid note with the indorsement: Pay to D; and on April 15, 1969, the said note was
indorsed in blank by D and delivered to X, without consideration. Upon As refusal to pay despite
demand, X filed an action to collect from A the total amount of the promissory note, with 12%
interest per annum from February 1, 1969, and the costs. As defenses are that the note is null and
void because the same was issued to pay a gambling debt and that in any event, his liability cannot
exceed more than one-half of the amount due. Are As defenses valid? Is X entitled to the whole
amount of the note? Explain. [1969 Bar Examination].

17. For the purpose of lending his name without receiving value therefor, Pedro makes a note for P20,000.00
payable to the order of X who in turn negotiates it to Y, the latter knowing that Pedro is not a party for
value. May Y recover from Pedro if the latter imterposes absence of consideration? Supposing under the
same facts, Pedro pays the said P20,000.00, may he recover the same amount from X? Explain [1998
Bar Examination].
Yes. Y can recover from Pedro. Pedro is an accommodation party. Absence of consideration is in the nature of
an accommodation. Defense of absence of consideration cannot be validly interposed by
accommodation party against a holder in due course.
If Pedro pays the said P20,000 to Y, Pedro can recover the amount from X. X is the accommodated party or the
party ultimately liable for the instrument. Pedro is only an accommodation party. Otherwise, it would be
unjust enrichment on the part of X if he is not to pay Pedro


18. Nora applied for a loan of P100,000.00 with BUR Bank. By way of accommodation, Noras sister, Vilma,
executed a promissory note in favor of BUR Bank. When Nora defaulted, BUR Bank sued Vilma,
despite its knowledge that Vilma received no part of the loan. May Vilma be held liable? Explain [1996
Bar Examination].\
Yes, Vilma may be held liable. Vilma is an accommodation party. As such, she is liable on the instrument to a
holder for value such as BUR Bank. This is true even if BUR Bank was aware at the time it took the
instrument that Vilma is merely an accommodation party and received no part of the loan

19. Santos purchased Veras car for P50,000.00. Not having enough cash on hand, Santos offered to pay in
check. Vera refused to accept the check unless it is indorsed by Reyes, their mutual friend. Reyes
indorsed Santos check and Vera, knowing that Reyes had not received any value for indorsing the
check, accepted it. The next day, Vera presented the check to the drawee bank for payment. Payment
was refused for lack of funds. Vera gave notice of dishonor to Reyes, but Reyes refused to pay, saying
that he indorsed merely as a friend. Is Reyes liable to Vera? In the event Reyes voluntarily pays Vera,
does Reyes have the right to recover from Santos? Explain [1985 Bar Examination].


D. INCOMPLETE DELIVERED INSTRUMENT

20. Larry issued a negotiable promissory note to Evelyn and authorized the latter to fill up the amount in blank
with his loan account in the sum of P1,000.00. However, Evelyn inserted P5,000.00 in violation of the
instruction. She negotiated the note to Julie who had knowledge of the infirmity. Julie, in turn,
negotiated said note to Devi for value and who had no knowledge of the infirmity. Can Devi enforce
the note against Larry, and if she can, for how much?Supposing Devi indorses the note to Baby for
value but who has knowledge of the infirmity, can the latter enforce the note against Larry? Explain
[1993 Bar Examination].
1) Yes, Devi can enforce the negotiable promissory note against Larry in the amount of P5,000. Devi is a holder
in due course and the breach of trust committed by Evelyn cannot be set up by Larry against Devi because it is a
personal defense. As a holder in due course, Devi is not subject to such personal defense.
2.Yes. Baby is not a holder in due course because she has knowledge of the breach of trust committed by
Evelyn against Larry which is just a personal defense. But having taken the instrument from Devi, a
holder in due course, Baby has all the rights of a holder in due course. Baby did not participate in the
breach of trust committed by Evelyn who filled the blank but filled up the instrument with P5,000
instead of P1,000 as instructed by Larry
21. Maria issued a negotiable promissory note and authorized Pilar to fill-up the amount in blank up to
P2,000.00. However, Pilar filled it up to P4,000.00 and negotiated the note to Pepe. For what amounts
are Maria and Pilar liable to Pepe? Explain [1972 Bar Examinations].


E. INCOMPLETE UNDELIVERED INSTRUMENT

22. PN makes a promissory note for P5,000.00, but leaves the name of the payee in blank because he wanted to
verify its correct spelling first. He mindlessly left the note on top of his desk at the end of the workday.
When he returned the following morning, the note was missing. It turned up later when X presented it to
PN for payment. Before X, T, who turned out to have filched the note from PNs office, had endorsed
the note after inserting his own name in the blank space as the payee. PN dishonored the note,
contending that he did not authorize its completion and delivery. But X said he had no participation in,
or knowledge about, the pilferage and alteration of the note and therefore he enjoys the rights of a holder
in due course under the Negotiable Instruments Law. Who is correct and why? [2000 Bar Examination].
a.PN is right. The instrument is incomplete and undelivered. It did not create any contract that would bind PN to
an obligation to pay the amount thereof.
b. A payee in a promissory note cannot be a holder in due course within the meaning of the Negotiable
Instruments Law, because a payee is an immediate party in relation to the maker. The payee is subject to
whatever defenses, real of personal, available to the maker of the promissory note.

23. Jose makes a negotiable note payable to bearer with the amount in blank and delivers it to Karen for
safekeeping. Marina fills up the note for P20,000.00 and negotiates it to Adriano, a holder in due course.
If you were Jose and Adriano presented to you the note for payment, what defense or defenses are you
going to interpose to negate liability on the instrument? Explain [1981 Bar Examinations].
24. A entrusted to B, his secretary, a blank check drawn on X bank, signed by him, with instructions to fill up
the check in favor of D for the amount of P1,000.00 and to thereafter deliver the said check to D. In
breach of trust, B filled up the check by writing the name of E, and the amount of P2,000.00 on the
check and delivered the same to E, who accepted it in payment of certain goods sold by E to B. Before E
could encash the check, A learned of the misdeed of B and issued a stop-payment order to X bank as a
result of which X bank refused to honor the check presented to it by E. Can E now hold X bank and A
liable? Reason [1971 Bar Examinations].

25. Jose Reyes signed a blank check, and in his hasted to attend a party, left the check on top of his executive
desk in his office. Later, Nazareno forced the door to Reyes office and stole the blank check. Nazareno
immediately filled in the amount of P50,000.00 and a fictitious name as payee on the said check.
Nazareno then endorsed the check in the payees name and passed it to Roldan. Thereafter, Roldan
endorsed the check to Dantes. Can Dantes enforce the check against Jose Reyes? If Dantes is a holder in
due course, will your answer be the same? [1985 Bar Examinations].

26. A signed a blank check which he inadvertently left at his desk at his Escolta Office. The same was later
stolen by B, who filled in the amount of P22,300.00 and a fictitious name as payee. B then endorsed the
check in the payees name and passed the check to C; thereafter C passed it to D; then D to E; and E to
F. Can F enforce the instrument against A? Suppose that F is a holder in due course, what will be your
answer? Can F enforce the instrument against B? Against C. Give reasons [1978 Bar Examinations].


F. FORGERY

27. A delivers a bearer instrument to B. B then specially indorses it to C, and C later indorses it in blank to D. E
steals the instrument from D and, forging the signature of D, succeeds in negotiating it to F who
acquires the instrument in good faith and for value. If, for any reason, the drawee bank refuses to honor
the check, can F enforce the instrument against the drawer? In case of the dishonor of the check by both
the drawee and the drawer, can F hold any of B, C and D liable secondarily on the instrument? [1997
Bar Examinations].
a) Yes. The instrument was payable to bearer as it was a bearer instrument. It could be negotiated by mere
delivery despite the presence of special indorsements. The forged signature is unnecessary to presume the
juridical relation between or among the parties prior to the forgery and the parties after the forgery. The only
party who can raise the defense of forgery against a holder in due course is the person whose signature is
forged.
b) Only B and C can be held liable by F. The instrument at the time of the forgery was payable to bearer, being
a bearer instrument. Moreover, the instrument was indorsed in blank by C to D. D, whose signature was forged
by E cannot be held liable by F.

28. Juan makes a promissory note payable to his order, signing Pedros name thereon as maker without Pedros
knowledge and consent. Juan then indorses the note to Jose, who, in turn, indorses it to Carlos under
circumstances which make Carlos a holder in due course. May Carlos enforce the note against Pedro?
And if the note is dishonored by Pedro, may Carlos hold Juan and Jose liable on their respective
indorsements? Reason out your answers [1989 Bar Examinations].

29. Juan makes a promissory note payable to the order of Pedro, who indorses it to Jose. Somehow, Roberto
obtains possession of the note and, forging the signature of Jose, indorses it to Amado. Amado then
indorses the note to Nilo, the holder. State the rights and liabilities of the parties [1984 Bar
Examinations].
30. A makes a negotiable promissory note payable to B or bearer. A delivers the note to B. B indorses the note
to C. C places the note in his wallet, which was stolen by X, who, finding the note, indorses it to D by
forcing Cs signature. D indorses the note to E, who in turn, delivers the note to F, a holder in due
course, without indorsement. What are the liabilities of A, B and C to F. Explain briefly [1981 Bar
Examinations].

31. Juan de la Cruz signs a promissory note payable to Pedro Lim or bearer, and delivers it personally to Pedro
Lim. The latter somehow misplaces the said note and Carlos Ros finds the note lying around the corridor
of the building. Carlos Ros endorses the promissory note to Juana Bond, for value, by forging the
signature of Pedro Lim. May Juana Bond hold Juan de la Cruz liable on the note? Explain [1980 Bar
Examinations].

32. Fernando forged the name of Daniel, manager of a Trading Company, as the drawer of a check. The Bank of
Philippine Islands, the drawee bank, did not detect the forgery and paid the amount. May the bank
charge the amount paid against the account of the alleged drawer? Explain [1977 Bar Examinations].


G. FRAUD

33. A succeeded in making B affix his signature on a check without Bs knowing that it was a check. At the
time of signing, the check was complete in all respects. A intended to cash the check the following
morning, but that night, it was stolen by C who succeeded in negotiating the same to D, a holder in due
course. D cashed the check the following morning. B refused to have the amount of the check deducted
from his bank deposit. Who may properly be charged with the amount of the check? Explain your
answer [1961 Bar Examinations].

34. A induces B by fraud to make a promissory note payable on demand to the order of A in the sum
of P5,000.00. Can A file an action successfully against the maker B for the amount of the note?
Reasons. Going further, A transfers the note to C who pays P5,000.00 therefor and acquires the note
under circumstances that make him (C) as holder in due course. Can C file an action successfully against
B, the maker of the note, for the amount of the note? What defense/defenses can B interpose? Explain
[1978 Bar Examinations].


H. MATERIAL ALTERATION

35. A check for P50,000.00 was drawn against drawee bank and made payable to XYZ Marketing or order. The
check was deposited with payees account at ABC Bank which then sent the check for clearing to
drawee bank. Drawee bank refused to honor the check on the ground that the serial number thereof had
been altered. XYZ Marketing sued drawee bank. Is it proper for the drawee bank to dishonor the check
for the reason that it had been altered? In instant suit, drawee bank contended that XYZ Marketing as
payee could not sue the drawee bank as there was no privity between them. Drawee theorized that there
was no basis to make it liable for the check. Is this contention correct? Explain [1999 Bar
Examinations].

36. William issued to Albert a check for P10,000.00 drawn on XM Bank. Albert altered the amount of the check
to P210,000.00 and deposited the check to his account with ND Bank. When ND Bank presented the
check for payment through the Clearing House, XM Bank honored it. Thereafter, Albert withdrew the
amount of P210,000.00 and closed his account. When the check was returned to him after a month,
William discovered the alteration. XM Bank recreditedP210,000.00 to Williams current account and
sought reimbursement from ND Bank. ND Bank refused, claiming that XM Bank failed to return the
altered check within the 24 hour clearing period. Who, as between XM Bank and ND Bank, should bear
the loss? Explain [1996 Bar Examinations].

37. In consideration of some goods he bought, A issued to B a personal check in the amount of P280.00 which
B altered toP2,800.00 without the knowledge of A. The alteration is not apparent to the naked eye. B
then deposited the altered check in his account with PNB, which released it for clearing. The BPI, the
drawee bank, did not notice the alteration and the check therefore cleared. B was able to withdraw
theP2,800.00, after which, he closed his account. When A received his bank statement and cancelled
checks, he noticed the discrepancy in the amount when he compared the altered check with his check
stub. He immediately notified BPI and demanded a recredit. BPI, in turn, demanded recredit from PNB
which cannot now locate B. Can A compel BPI to recredit his account? If so, how much? Can PNB be
compelled to reimburse BPI of the amount the latter may have recredit to the account of A? Explain
[1986 Bar Examinations].

38. Pedro writes out a check for P1,000.00 in favor of Jose or order against his current account with the Bank of
America. Juan steals the check, erases the name of Jose and superimposes his own name. Juan deposits
the check at Citibank and after clearing, Juan withdraws the amount and absconds. Upon discovery by
Pedro of the material alteration, he lodged a complaint at the Bank of America, who debited the amount
to Pedro. Bank of America demands reimbursement for Citibank which refuses on the ground that it
only acted as an agent for collection. Who bears the loss? Why? [1977 Bar Examinations].

39. Maria issued a negotiable promissory note and authorized Pilar to fill up the amount in blank up
to P2,000.00 only. However, Pilar filled it up to P4,000.00 and negotiated the note to Pepe. For what
amount are Maria and Pilar liable to Pepe? Explain [1972 Bar Examinations].

40. A executed a bill of exchange for P500.00 in favor of B, who altered the amount toP5,000.00 and presented
the bill to the drawee for acceptance. The drawee, not knowing of the alteration which was neatly done,
accepted the bill. Thereafter, N negotiated the bill to C, who now seeks to hold the drawee liable
for P5,000.00. The drawee contends that under the rule on alteration, he can only be liable up
to P500.00. Is the drawees contention tenable? Can the drawee debit the amount of A, and if so, to what
extent? Reasons [1971 Bar Examinations].

I. MINORITY

41. X makes a promissory note for P10,000.00 payable to A, a minor, to help him to buy school books. A
endorses the note to B for value, who in turn endorses the note to C. C knows A is a minor. If C sues X
on the note, can X set up the defenses of minority and lack of consideration? Explain [1998 Bar
Examinations].
Yes. C is not a holder in due course. The promissory note is not a negotiable
instrument as it does not contain any word of negotiability, that is, order or bear, or words of similar
meaning or import. Not being a holder in due course, C is to subject such personal defenses of minority
and lack of consideration. C is a mere assignee who is subject to all defenses

X cannot set up the defense of the minority of A. Defense of minority is available to the minor only. Such
defense is not available to X.

X cannot set up the defense against C. Lack of consideration is a personal defense which is only available
between immediate parties or against parties who are not holders in due course. Cs knowledge that A is
a minor does not prevent C from being a holder in due course. C took the promissory note from a holder
for value, B
42. X, without receiving consideration therefor, makes a promissory note for P500.00 payable to A, a minor, to
help him buy school books. A indorses the note to B, who, in turn, indorses the note to C. C knows As
minority. If C presents the note to X for payment, what are the possible defenses to be interposed by X?
If C sues X on the note, can X set up the defense of minority and lack of consideration? Explain [1989
Bar Examinations].

WARRANTIES/LIABILITIES

J. ACCEPTOR

43. X draws a check against his current account with Ortigas Branch of Bonifacio Bank in favor of B. Although
X does not have sufficient funds, the bank honors the check when it was presented to payment.
Apparently, X has conspired with the banks bookkeeper so that his ledger card would show that he still
has sufficient funds. The bank files an action for recovery of the amount paid to B because the check
presented has no sufficient funds. Decide the case [1998 Bar Examinations].

K. NEGOTIATOR BY DELIVERY

44. Anna makes a promissory note payable to bearer and delivers it to Bing. In turn, Bing negotiates it by mere
delivery to Carmen, who indorses it specially to Dong. Dong negotiates it by special indorsement to
Emma, who negotiates it to Fe by mere delivery. Anna did not pay. To whom are Bing and Carmen
liable? To whom are Dong and Emma liable? Explain [1988 Bar Examinations].


L. INDORSERS

45. Alex issued a negotiable promissory note (PN) payable to Benito or order in payment of certain goods.
Benito indorsed the PN to Celso in payment of an existing obligation. Later, Alex found the goods to be
defective. While in Celsos possession, the PN was stolen by Dennis who forged Celsos signature and
discounted it with Edgar, a money lender who did not make inquiries about the PN. Edgar indorsed the
PN to Felix, a holder in due course. When Felix demanded payment of the PN from Alex, the latter
refused to pay. Dennis could no longer be located. What are the rights of Felix, if any, against Alex,
Benito, Celso and Edgar? Explain. Does Celso have any right of action against Alex, Benito and Felix?
Explain [1995 Bar Examinations].
46. A drew a check for P1,000.00 on B, the Bank payable to the order of C and delivered the check to the latter
for value. C indorsed the check in blank and negotiated it to D, who lost it. At Ds request, A ordered
payment stopped by notifying B. The stop payment order was overlooked and the check was paid to E,
who had taken the check, without actual knowledge of the loss, in payment of merchandise sold to a
stranger whom he thought owned the check. D now sues the bank. Decide the case with brief reasons
[1979 Bar Examinations].




INCIDENTS

M. NEGOTIATION

47. Richard Clinton makes a promissory note payable to bearer and deliverrs the same to Autora Page. The
latter, however, endorses it to X in this manner: Payable to X, Signed: Aurora Page. Later, X, without
endorsing the promissory note, transfers and delivers the same to Napoleon. The note is subsequently
dishonored by Richard Clinton. May Napoleon proceed against Richard Clinton for the note? [1998 Bar
Examinations].
Yes. Richard Clinton is liable to Napoleon under the promissory note. The note made by Richard Clinton is a
bearer instrument. Despite special indorsement made by Aurora Page thereon, the note remained a bearer
instrument and can be negotiated by mere delivery. When X delivered and transferred the note to Napoleon, the
latter became a holder thereof. As such holder, Napoleon can proceed against Richa

48. On November 3, as payment for goods received, A gave to B his check drawn on PNB, Manila. B
thereafter negotiated the check to C. On November 10, C could not encash the check because the
Bangko Sentral had forbidden PNB to do business on grounds of insolvency. Can C hold A liable
on the uncashed check? Can C hold B liable instead on the uncashed check? Explain. If you were
B, how would you negotiate the check to negate future liability thereon? Explain [1987 Bar
Examinations].

N. DISHONOR

49. When is notice of dishonor not required to be given to the drawer? [1996, Bar Examinations].
Notice of dishonor is not required to be given to the drawer in any of the following cases: a) Where the drawer
and drawee are the same person; b) When the drawee is a fictitious person or a person
not having capacity to contract; c) When the drawer is the person to whom the
instrument is presented for payment; d) Where the drawer has no right to expect or require
that the drawee or acceptor will honor the
instrument; e) Where the drawer has countermanded payment

50. A issued a promissory note to B dated January 1, 2002, in the following tenor: I promise to pay to the order
of B P1,000.00 sixty days after date. (Sgd.) A. The note was subsequently negotiated with proper
indorsement by B to C, C to D, and D to E, the holder. When E presented the note for payment to A, the
latter refused to pay. E then gave a notice of dishonor to C only. May E immediately proceed against B,
C or D? What should C do to protect his rights, if any, against A, B and D? Explain [1984 Bar
Examinations].

51. X draws a bill of exchange against Y in favor of W for P1,000.00, requesting the drawee to pay on
December 24, 1962. W indorses the instrument to P on September 1 and on September 15 presents it for
acceptance. The bill is dishonored. P promptly sues W for payment. Will the case prosper? Give reasons
for your answer [1963 Bar Examinations].