NEGOTIABLE INSTRUMENTS NOTES

BASED ON AGBAYANIS BOOK AND ATTY. MERCADOS LECTURES

Page 95 of 190


BY: MA. ANGELA LEONOR C. AGUINALDO
ATENEO LAW 2D BATCH 2010

HELD:
The warranties for which Alviar and Gonzales are liable as general
indorsers in favor of subsequent indorsers extend only to the state of the
instrument at the time of their indorsements, specifically that the
instrument is genuine and in all respects what it purports to be; that they
have good title thereto; that all prior parties had capacity to contract; and
that the instrument, at the time of their endorsements, is valid and
subsisting. This however cannot be used by someone which introduced the
defect in the instrument, such as the bank in this case, which qualifiedly
indorsed the same, to hold prior parties liable on the instrument because it
results to an absurd situation whereby a subsequent party may render an
instrument useless and inutile and let innocent parties bear the loss while
he himself gets away scot-free. It cannot be overstressed that had it not
been for the qualified indorsement of Gomez, there would have been no
reason for the dishonor of the check.

Sec. 67. Liability of indorser where paper negotiable by delivery.
Where a person places his indorsement on an instrument
negotiable by delivery, he incurs all the liability of an indorser.

CASE DIGESTS: SECTION 67

130 JAI ALAI V. BPI
66 SCRA 29

FACTS:
Checks were deposited by petitioner in its current account with the bank.
These checks were from a certain Ramirez, a consistent better in its
games, who was a sales agent from Inter-Island Gas. Inter-Island later
found out that of the forgeries committed in the checks and thus, it
informed all the parties concerned. Upon the demands on the bank as the
collecting bank, it debited the account of petitioner. Thereafter, petitioner
tried to issue a check for payment of shares of stock but such was
dishonored for insufficient funds. It filed a complaint against the bank.

HELD:
Considering that the petitioner indorsed the said checks when it deposited
them with the respondent, the petitioner as an indorser guaranteed the
genuineness of all prior indorsements thereon. The respondent which
relied upon the petitioners warranty should not be held liable for the
resulting loss.

Furthermore, the provision in the deposit slip on the right of reservation by
the bank applies only when there is actual receipt of current funds or
solvent credits. But as earlier on indicated, the transfer on account of the
checks were ineffectual because it was made under the mistaken and valid
assumption that the indorsements of the payee thereon were genuine.

Sec. 68. Order in which indorsers are liable. - As respect one
another, indorsers are liable prima facie in the order in which they
indorse; but evidence is admissible to show that, as between or
among themselves, they have agreed otherwise. Joint payees or
joint indorsees who indorse are deemed to indorse jointly and
severally.

APPLICATION OF SECTION
Applies only with respect to an indorser as against another but not as
against a holder in due course
Every indorser is liable to all indorsers subsequent to him but not
those prior to him whom he in turn makes liable

JOINT AND SEVERAL LIABILITY OF JOINT PAYEES
Joint payees or joint indorsees are deemed to indorse solidarily

EFFECT OF LACK OF NOTICE OF DISHONOR, ETC.
One of the joint indorsers cannot escape liability because proper notice
of dishonor wasnt given to his joint indorser

Sec. 69. Liability of an agent or broker. - Where a broker or other
agent negotiates an instrument without indorsement, he incurs all
the liabilities prescribed by Section Sixty-five of this Act, unless he
discloses the name of his principal and the fact that he is acting
only as agent.

APPLICATION OF SECTION 69
Instruments payable to bearer
To escape personal liability as a party negotiating by delivery, the
agent must disclose his principal and state that he is acting only as an
agent

VI. PRESENTATION FOR PAYMENT

Sec. 70. Effect of want of demand on principal debtor. -
Presentment for payment is not necessary in order to charge the
person primarily liable on the instrument; but if the instrument is,
by its terms, payable at a special place, and he is able and willing