Beruflich Dokumente
Kultur Dokumente
(Sgd) Bella
NO TIME
Baguio City
19 November 2001
P40,000.00
Pay to the order of Juana forty thousand pesos.
To: Clara (drawee)
(Sgd)
Bella
No time for payment so it is payable on demand.
NB: A CHECK has NO TIME OF PAYMENT therefore it is payable on demand.
Sec. 185 A check is a bill of exchange drawn on a bank payable on demand
Instrument is OVERDUE
Ex:
At the outset bill of exchange/promissory note was issued at 1 May 2001 and payable on 7 August 2001.
Baguio City
1 May 2001
P8,000.00
I promise to pay to Ana or bearer the sum of eight
thousand pesos on 7 August 2001.
(Sgd) Pablo
- Overdue and yet it was endorsed payable on demand
- When you indorsed an overdue instrument then it is payable on demand
Sec. 47 An instrument negotiable in its origin continues to be negotiable until it has been restrictively indorsed or
discharged by payment or otherwise. (ex: destroying the instrument)
STALE CHECK (when not presented for payment within 6 months)
Stale check can still be negotiated but it needs the replacement of new one.
(nb: check cannot be overdue because it is payable on demand)
STALE DEMAND (by laches)
FIXED FUTURE TIME
Ex: Christmas day of 2001
DETERMINABLE FUTURE TIME
Day certain
How to determine with reference to the happening of a specified event that is sure to happen but it cannot be known
when.
Ex: Death of any being
P50,000.00
I promise to pay to the order of Berto fifty thousand
pesos 1 week after his only carabao will die.
(Sgd) Harry Potter
Carabao will die specified event
P80,000.00
I promise to pay to the order of Claro eighty thousand
pesos 1 month after his only cow will die of syphilis.
(Sgd) Harry Potter
Cow will die of syphilis not sure to happen
Payable upon a contingency
Under last paragraph of Sec. 4, an instrument payable upon a contingency is not negotiable and the happening of the
event does not cure the defect.
Q: What if the only cow of Claro will die of syphilis?
A: The instrument is still not negotiable because the happening of the contingent event does not cure the defect. (Sec. 4
last par.)
*Day certain
PAYABLE TO ORDER
Sec. 8 Payable to
i. the ORDER of a specified person or
ii. a specified person or his order.
Order or a specified person
Ex: to the order of Juan
Specified person or his order
Ex: to Juan or (his) order
In this instance, payment is not limited to Juan but also to the pleasure of Juan (eg: by indorsing, signing at the back of
the instrument and deliver it to somebody)
NOT NEGOTIABLE, if payable to SPECIFIED PERSON because there is a limitation.
*Sec. 34 Indorsement
PAYABLE TO BEARER (Sec. 9)
5 Instances:
1. EXPRESSLY (eg: Pay to BEARER)
2. Person named/specified therein or BEARER (eg: Pay to Jose [payee] or bearer)
Sec. 8, last par. when the instrument is payable to order the payee must be named or otherwise indicated
therein with reasonable certainty.
Payee person specified in the instrument
Sec. 9 no need of specifying the person
Q: How to know if the instrument is payable to bearer?
A: See Sec. 9
In, ORDER payee must indorse it first
In, BEARER payee does not need to endorse
3. FICTITIOUS PERSON/PAYEE and such is known to the person making it payable.
(eg: Pay to the order of Tarzan)
4. NAME OF THE PAYEE DOES NOT PURPORT TO THE NAME OF ANY PERSON
(eg: Pay to the order of CASH)
nb: the word order is not the controlling factor
5. WHEN THE ONLY OR LAST INDORSEMENT IS AN INDORSEMENT IN BLANK (in relation to Secs. 33 and 34
1.
2.
3.
4.
5.
Fictitious
Expressly made payable
Not named
Indorsement in blank
Specified (named)
BLANK INDORSEMENT
signature affix, written at the back of the instrument// made by the payee who is first to indorse
CLASSIFICATIONS OF INDORSEMENT
1. Blank indorsement- an indorsement that does not specify the indorsee
Ex:
Baguio City
22 November 2001
P50,000.00
I promise to pay to the order of Ruby the sum of fifty
thousand pesos.
(Sgd) Harry Potter
At the back
To:
Ruby
(Sgd)
(Sgd) Ruby
To:
(Sgd)
Rosanna
(blank indorsement)
-This is payable to bearer because last indorsement is in blank, hence the whole instrument is converted to payable to
bearer(blank indorsement)
-Last indorsement matters
-not permitted to alter the instrument (that is: in words) to make it payable to bearer.
-impossible and illegal to make an instrument payable to bearer to become payable to order.
UNCONDITIONAL PROMISE OR ORDER TO PAY A SUM CERTAIN IN MONEY
Sec.2 the amount payable remains a sum certain although it is to be paid with an interest by stated installments with an
acceleration clause although it is to be paid with exchange with cost of collection or an attorneys fee. (keyword: CESIA
Cost, Exchange, Stated, Interest, Acceleration)
1. with an INTEREST -must be in writing to be binding on the debtor (Art. 1956, NCC)
Ex: Bill of Exchange/Promissory Note -obligor bound himself to pay interest as written on the face of the instrument.
1.
22 November 2001
P10,000.00
I promise to pay to the order of Pedro ten thousand
pesos with an interest of 2% per month on 22 January
2002.
(Sgd) Harry Potter
-amount is payable in sum certain although it is with interest
-P10,400.00 due on 22 January 2002
2.
P12,000.00
I promise to pay to Maria or bearer the sum of twelve
thousand pesos with an interest on 22 April 2002.
(Sgd) Harry Potter
-even if rate of interest is not specified, the legal rate of interest shall be applied. (Central Bank Circular #416 the legal
rate of interest is 12% per annum)
Bill of Exchange/Promissory note representing balance of installment sales (6% pa interest) -obligation arises from a
sale
Sec. 1 amount payable sum certain
Sec. 2. sum certain but to pay by stated installment, with an interest, acceleration clause, exchange, cost of
collection/attorneys fee (CESIA)
Nb: 1) It must be EXPRESSLY STATED that there is payment of interest (Art. 1956, NCC)
2) If there is stipulation but no rate then legal rate of interest applies.
2. STATED INSTALLMENT
The following must be specified:
a. Amount of each installment and
b. Due date for each installment
If there is not amount and due date specified the it is NOT NEGOTIABLE because the amount will be uncertain.
PAYABLE BY INSTALLMENT
Ex: Negotiable; amount sum certain
P20,000.00
Pay to Adquilen or bearer the sum of twenty thousand
pesos by installment as follows:
a) P3,000.00 due on 1 January 2002
b) P4,000.00 due on 2 February 2002
c) P5,000.00 due on 3 March 2002
d) P2,000.00 due on 4 April 2002
e) P6,000.00 due on 5 May 2002
To: Reynaldo
Potter
Negotiable; amount sum certain
P16,000.00
(Sgd) Harry
(Sgd) Harry
(Sgd) Harry
US$2,000.00
Pay to the order of Juan de la Cruz the sum of two
thousand US dollar in Philippine peso at the current
rate of exchange.
To: Clara
(Sgd) Harry
Potter
-here, the instrument is payable on demand because no time of payment is made
-current rate at the time of the payment prevails (Ponce vs CA, 90 SCRA 332)
5. COST OF COLLECTION OR/AND ATTORNEYS FEE -does not include any other expenses
Ex:
P50,000.00
I promise to pay to the order of Juan de la Cruz fifty
thousand pesos on 16 January 2002.
In the event I fail to pay and as a consequence a
case will be filed against me, I bind myself to pay an
additional amount equivalent to 20% of the principal
obligation to pay cost of collection or attorneys fee.
(Sgd) Harry Potter
SECTION 3-Promise is unconditional
ORDER/PROMISE to pay remains UNCONDITIONAL although couple with:
1. An indication of particular fund -for reimbursement
2. Statement of the transaction which gave rise to the instrument. -a mere statement on how come the instrument was
issued in ONLY a statement stating WHAT TRANSPIRED between the parties as a consequence of it the instrument was
issued.
P50,000.00
I promise to pay to the order of Reynaldo the sum of
fifty thousand pesos on 5 May 2002.
This promissory note was executed by me because
of the fact that I purchased from the payee a
Mitshubishi Lancer car model 1964 with plate number
ADB398 and the aforesaid amount represents my
balance on that sale.
(Sgd) Harry Potter
-In the first paragraph, the promise to pay is absolute
-In the second paragraph, mere statement of what transpired.
Q: What prompted Harry to issue the promissory note?
A: There was a sale/transaction
P50,000.00
I promise to pay to the order of Reynaldo fifty
thousand pesos after he will sell to me his car with
plate number ADB 398.
(Sgd) Harry Potter
Q: Is this negotiable?
A: It is NOT because the condition is unconditional.
INDICATION OF PARTICULAR FUND OUT OF WHICH THE REIMBURSEMENT IS TO BE MADE
FUND is a source of reimbursement
i. It can be where the drawee can be reimbursed, or
ii. Where the drawee may be able to compensate for what he will pay
Last paragraph of Sec. 3 -but an order or promise to pay out of a particular fund is not unconditional. (here, the FUND
means the actual source of payment)
Fund as source of payment vs. Fund as source of reimbursement
Fund as source of payment
Ex:
P10,000,000.00
Pay to the order of the DPWH the sum of ten million
pesos on 15 January 2002 out of the fund in the
National Government Treasury.
(Sgd) Auditor General
To: The Treasurer of the Philippines
-fund is mentioned
-this is NOT NEGOTIABLE (but valid) because the order to pay is conditional for it is payable out of particular fund.
-it is conditional because payment depends on a condition that the fund indicated is sufficient (Payment is based in
contingency, that is the availability of funds.
A TREASURY WARRANT is not negotiable because it is payable out of a particular fund.
-DRAWEE IS REQUIRED TO PAY BUT WHETHER HE CAN BE REIMBURSED OR NOT IS BESIDE THE POINT
P90,000.00
P50,000.00
I promise to pay to the order of Ruby fifty thousand
pesos on 5 May 2002 after I am able to sell my
Mitshubishi Lancer Car with plate number ABD 398 in a
public auction sale to be undertaken by me or my
attorney in face.
(Sgd) Harry Potter
-NOT NEGOTIABLE because there is a condition. Payment depends on the sale of the car.
Sec. 5 (b)
3 forms of Confession of Judgment
1. WARRANT of Attorney
2. Cognovit Actionem
3. Relicta verificationem
Warrant of attorney -Confession of judgment made before an action filed in the court
In this jurisdiction this form of judgment is VOID because:
It enlarges the field of fraud;
It denies a party his day in court; and,
It deprives a party his statutory right to appeal.
If warrant of attorney is made as if note warrant of attorney is made at all
Confession of judgment means that the obligor acknowledge his liability that may arise from the instrument.
Cognovit actionem -one that is made after a case has been filed in court.
*This is VALID in this jurisdiction.
Relicta actionem -similar to cognovit actionem, valid also in this jurisdiction, but here, the defendant or the respondent
initially raise a defense against a claim but later on abandons this defense.
Ex:
Defendant denying that he paid the liability, but the abandonment is tantamount to a liability.
P50,000.00
I promise to pay to the order of Ruby fifty thousand
pesos on 6 June 2002. In the event I failed to pay the
aforesaid obligation and as a consequence thereof a
case should be filed against me in court for collection
of sums of money, I hereby authorize Pedro as my
attorney in fact to acknowledge in my behalf the liability
that may arise from the issuance of this note.
(Sgd) Harry Potter
If warrant of attorney is made as if no warrant of attorney is made at all.
Sec. 5 (c)-obligor = drawer/indorser in relation to Sec. 89
Sec. 89 -person secondarily liable (referring to the drawer/indorser) is entitled to a notice of dishonor.
Q: What is the advantage of the person secondarily liable?
A: He can be discharged/relieved from liability.
NOTICE OF DISHONOR -notice to be made by the holder informing the person secondarily liable the fact that the
instrument was refused payment or acceptance.
Q: What is the form of the notice?
A: It must be in writing (for convinience).
BP 22 is not the same with Sec. 89 of NIL
Ex: Bill of Exchange
P20,000.00
Pay to the order of Ruby twenty thousand pesos on 3
March 2002.
Notice of Dishonor is hereby waived.
(Sgd) Harry Potter (drawer)
To: Reynaldo (drawee)
-even if one does not receive a NOTICE, he is still liable.
Sec. 6
1. Omissions (may be intentional or not)
2. Additions
INTENTIONAL OMISSION: the instrument:
1. is not dated
2. does not specify the value given
3. does not specify the place where it is issued or drawn
ADDITIONS
1. seal
2. particular kind of current money which payment is to be made (ie: designating of denomination)
NOT DATED
-When the promissory note is not dated, and one does not know when it was executed, then he can put the date of issue
[Sec. 17 (c)]
DOES NOT SPECIFY THE VALUE GIVEN
-There is a presumption that it is in exchange of a valuable consideration (Sec. 24 Presumption of Consideration)
PLACE (issued/drawn)
See: Sec. 17 in relation to Sec. 73 (Place of presentment)
In his (obligors)
1. residence
2. place of business, or
3. in any other place where he could be found.
Promissory note vs Bill of Exchange
PROMISSORY NOTE
-Unconditional promise
-4 essential elements
1. Unconditional promise
2. Signed by maker
3. Payable on demand or at a fixed or
determinable future time
4. Payable to bearer or order
BILL OF EXCHANGE
-Unconditional order
-5 elements
1. Unconditional order in writing
2. Addressed by one person to another
3. Signed by the person issuing it
4. Order to pay on demand or at a fixed or
determinable future time a sum certain in
money
5. Order to pay must be to order or to bearer.
-drawee must be named
PRESENTMENT FOR ACCEPTANCE -drawer may be liable under Sec. 62 once the bill of exchange has been accepted.
Sec. 60: liability of the maker
-maker is the person to whom you should present the instrument first
-maker is principally liable
*In a bill of exchange, the one primarily liable is the drawee.
Bill of Exchange vs Check
Bill of Exchange
-payable on demand or at a fixed or determinable
future time
-drawee may not be a bank
-act of issuing without sufficient fund is NOT
CRIMINAL
-may be presented for acceptance
Check
-always payable on demand
-drawee is always a bank
-act is CRIMINAL
-need not be presented for acceptance
CROSSED CHECK
Generally crossed by 2 diagonal parallel lines at the upper left corner of the check or instrument.
Specially
The example is GENERALLY CROSSED CHECK
SPECIALLY CROSSED CHECK
Ex:
Baguio City
6 December 2001
P80,000.
Pay to the order of CASH the amount of eighty thousand pesos.
(Sgd) Harry Potter
To: PNBank
-specific name of a bank is written in between the 2 diagonal parallel lines.
-named bank merely becomes a drawee bank
PURPOSE OF CROSSED CHECK
1. It will be for deposit
2. Negotiated only once by the payee
-drawee has issued that crossed check to see to it that the particular objective will be achieved.
DRAFT/BANK DRAFT -a check drawn by one bank against another bank.
Addenda:
1) Sec. 184 Promissory Note: Unconditional promise in writing
Sec. 126 Bill of Exchange: Unconditional order
2) Promissory Note 4 Elements
3) PN not presented
-maker, when he presents PN = payment
BOE presented for acceptance or payment
Upon acceptance drawee becomes primarily liable under Sec. 62
4) PN 2 parties (maker and payee)
BOE 3 parties (1. drawer issues instrument; 2. payee; 3. drawee whom the instrument is addressed [required to pay]
Sec. 126
5) Maker liable
-pay instrument according to the tenor of Sec. 60.
-person directly responsible to pay to whom instrument should be presented first
If he refuses to pay then go to the person who indorse it.
BOE: drawer secondarily liable
Drawee primarily liable
-Any indorser is also secondarily liable.
Check drawn for specific amount but not sufficiently funded with the drawee and is subsequently dishonored (bouncing
check) by the drawee.
Sec. 6 Addendum:
A. Seal, not essential
1) For advertisement
2) For identification
3) For embellishment
B. Designation of particular kind of current money in which payment is to be made
-denomination
P100,000.00
Marlon promised to pay to the order of Reynaldo one
hundred thousand pesos with use of 100 pieces of
P100 bills.
(Sgd) Harry Potter
-payment of P100,000 with the use of P100 bills
-specify denomination but not condition simply a designation of the denomination used.
As differentiated with:
Sec. 2 amount payable is to be made in exchange (speaks of two kind of currency)
Sec. 184
To pay on
1. Demand
2. Fixed future time, or
3. Determinable future time
A sum certain in money to order or a bearer
CASHIERS CHECK -check drawn by a cashier of a particular bank against the same bank where he is employed as a
cashier.
Effect: as good as cash, but not a legal tender
Date of payment -takes the effect of payment when encashed
MANAGERS CHECK
-check drawn by a manager of a particular bank against the same bank where he is employed as manager
-as good as cash, but not a legal tender
-takes effect when encashed
BLANK CHECK
-incomplete instrument (Secs. 14 and 15)
-the amount is not yet written
MEMORANDUM CHECK
-contains memorandum to the effect that this will be followed before encashing
-not condition
-guidelines
-written at the back on another paper attach to the check.
GUARANTEE CHECK -issued to simply guarantee payment of an existing obligation.
ACCOMMODATION CHECK -issued by drawer who did not receive any valuable consideration for drawing it from the
payee or bearer.
Sec. 12
ANTE-DATED
-date earlier than the actual date of drawing or
issuance
POST-DATED
-date later than the actual date of issuance or
drawing the instrument
effect: before encashing, wait for the arrival of post
date
SPECIAL INDORSEMENT
-if indorsee is specifically named
BLANK INDORSEMENT
last indorser
-payable to bearer
Sec. 36 RESTRICTIVE INDORSEMENT
1. Prohibits further negotiation
ex: To: Maria only (-negotiable but ceases to be because further negotiation is prohibited.
2. When it constitutes the indorsee being an agent of indorser
ex: To: Maria for collection only
(Sgd) Harry Potter
3. When it vests title to the indorsee in trust of for the benefit of other persons
ex: To: Maria in trust for my son
(Sgd) Juan
CONDITIONAL INDORSEMENT
-nothing to do with promise or order to pay
ex: To: Maria if she tops the 2001 Bar Exams (not referring with the promise to pay)
Suspensive condition happening of event gives rise to the obligation.
-however, the payee may disregard such condition or vice versa he may not be required to pay without the happening of
the event.
QUALIFIED INDORSEMENT
-indorsee is only an assignee of the indorser
ex: To: Maria sans (without) recourse
indorser indorses the instrument to indorsee for payment from payee, but if drawee is insolvent, indorsee has not
recourse against indorser.(but not for other reason than insolvency)
Sec. 13 INSERTION OF DATE
Purpose: to determine the maturity of the instrument or the amount of interest
INSTANCES WHERE DATE MAY BE INSERTED
1. Instrument is payable at a fixed period after date but the instrument is undated.
2. Instrument is payable at fixed period after sight but the acceptance is undated.
A. Example of fixed period after date
(no date)___________
8,000.00
I promise to pay to the order of Ruby eight thousand
pesos five days after date of this instrument.
(Sgd) Harry Potter
-five days = fixed period
-insert the date of issue, then maturity can now be determined.
Sec. 17 (c) where the instrument is not dated
Q: What is the effect of inserting a wrong date and thereafter the instrument is negotiated in due course?
A: Sec 13. Insertion of a wrong date does not avoid the instrument but as to him that is the true date because of the right
of a holder in due course (see: Sec. 57)
Q: Who is a holder in due course?
A: Under Sec. 52, he who: (the conditions)
1. Takes the instrument complete and regular upon its face
2. Takes the instrument before it is overdue
3. Takes the instrument in good faith
4. Takes the instrument without knowledge of the infirmity or defect of the instrument.
(keyword: COGI: Complete, Overdue, Good faith, Infirmity)
Complete and regular upon its face
-all the essential elements are present, including all matters like date.
regular upon its face no suspicion of alteration
before overdue
Ex: Suppose the check was issued on 1 January 2002, today is 7 January 2002, the check is already overdue
for value and in good faith
for value in exchange for valuable consideration
(Sgd) Juan
Question #1
Q: As a holder (indorsee), what can Marta do with the check?
A: Marts may:
1. Indorse it further, or
2. Present the check to the drawee bank for payment
Question #2
Q: If Marta chose to present the check for payment but the bank dishonors the check, what must Marta do so that she
can recover from the persons who are secondarily liable?
A: Marta should give notice of dishonor to the persons secondarily liable [ie: 1) the drawer and 2) the drawee]
Q: What if Marta did not give any notice of dishonor?
A: Then the persons secondarily liable are DISCHARGED from liability.
NO form of notice but it must be in writing for purposes of convinience.
Question #3
Q: If Marta is not a holder in due course (ex: she knew of the infirmity/defect), can she enforce the check against Pedro?
A: No. She cannot enforce the instrument against Pedro because the latter can raise the personal defense that the
instrument was filled up not strictly in accordance with the authority given. The law requires that in order that the
instrument may be enforced it must be filled up with authority given and within a reasonable time.
Question #4
Q: Will your answer be the same as in the preceding question if Marta is a holder in due course (ie: she did not know that
there was infirmity/defect and if she knew, she was not a party thereor)?
A: NO. My answer will not be the same as in the preceding question. Marta can enforce the instrument as if it was strictly
filled up in accordance with the authority given and within a reasonable time. (see: last sentence of Sec. 14, NIL) [Sec.
57 Rights of holder in due course]
Marta can enforce the instrument free from defect and in its full amount of P47,000.00
Question #5
Q: Can Marta require Juan to pay P47,000.00 if the bank and Pedro do not pay?
A: YES.
Juan warrants Marta that:
1. The check is genuine and in all respect what it purports to be (ie: the amount is correct even if it was written
not strictly in accordance of the authority given)
SEC. 15 INCOMPLETE instrument and UNDELIVERED
undelivered means NO VALID DELIVERY
-no essential particular and no valid delivery
See: Sec 8 payee must be named
-instrument is INCOMPLETE
-COMPLETED and NEGOTIATED without authority
-Effect of signing: the instrument is NOT a valid contract in the hands of ANY HOLDER
-the instrument cannot be enforced by the holder (nb: even holder in due course) against the person who became the
party thereto prior to delivery
ILLUSTRATION:
FACE
P80,000.00
Pay to the order of Mr. ____________________
the sum of eighty thousand pesos .
(Sgd) RUA
To: PNBank
Facts:
Because of his gross negligence, RUA lost his incomplete instrument. Amado was the finder. He (Amado) placed his
name as payee unknown to RUA.
Thereafter, Amado negotiated the check to Lito.
BACK (after completion)
To: Lito
(Sgd) Amado (indorser)
Nb: from Amado to Lito = there is a valid delivery BUT from RUA to Amado = no valid delivery.
-Lito cannot enforce the instrument against RUA if the instrument is dishonored by the bank.
any holder includes holder in due course
Lito cannot enforce the instrument against RUA because the check cannot be valid in the hands of ANY HOLDER. Even if
Lito is a holder in due course he cannot enforce it against RUA considering that RUA was a person who place the
signature in the instrument before delivery.
INCOMPLETE INSTRUMENT
Can be enforced by a holder in due course
FACE
P____________.00
Pay to BEARER the sum of
____________________
(Sgd) Amado
To: Land Bank
Facts:
Amado placed this incomplete instrument in his cabinet. Rey took it without the consent of Amado.
Subsequently, Rey put the amount of ninety thousand pesos. Later, Rey indorsed it to Bartolo.
Bartolo presented the instrument to the bank but it was dishonored. He gave a notice of dishonor to Rey and
Amado.
BACK (after completion)
To: Bartolo
(Sgd) Rey
Read: Sec. 40 in relation to Sec. 30
In instrument payable to bearer = it can be negotiated by DELIVERY only, NO NEED TO INDORSE
Sec. 40: Payable to bearer can be indorsed but it may not be necessary because Sec. 30 payable to bearer is
negotiated by delivery.
- the instrument must be incomplete and undelivered
Question #1
Q: Can Bartolo require Amado to pay P90,000.00
A: NO.
Reason: The check is not a valid contract in the hands of any holder. Bartolo cannot enforce against Amado because
Amado is the person who placed his signature before delivery.
Question #2 (use Sec. 65 in relation to Sec. 66: WARRANTY)
Q: Can Bartolo require Rey to pay P90,000.00?
[additional facts: Rey made a SPECIAL INDORSEMENT (this made Amado a general indorser) and since Rey
indorsed it, Sec. 66 applies, otherwise, Sec. 65 applies]
A: YES. Bartolo can require Rey to pay the P90,000.00.
As an indorser Rey warrants to Bartolo that the instrument is genuine and in all respects what it purports to be.
[Rey incurred his warranty when he indorsed the check/instrument to Bartolo; nb: Amado is a drawer and he has NO
WARRANTY, it is only the INDORSER who warrants]
Even if Rey has no valid title, as far as Bartolo is concern Rey has a valid/good title because Rey warrants this.
Amado has a real defense (ie: the instrument is NOT a valid contract in the hands of any holder) under Sec. 15.
Sec. 14 is only a PERSONAL DEFENSE (that the instrument was filled up not strictly in accordance with the
authority given)
USE Sec. 65 when:
1. There is a qualified indorser
2. When the instrument is negotiated by delivery only
USE Sec. 66 when:
1.
One indorses an instrument without qualifications, or
2.
One is a general indorser (and this includes special indorser)
SEC. 16 (here, no problem about the instrument for it is COMPLETE but it is UNDELIVERED)
undelivered means NO EFFECTUAL DELIVERY (ie: no legal effect)
*There must have been a delivery BUT not effectual (eg: delivery was made by a person not authorized)
In the hands of a holder in due course, a valid and intentional delivery is conclusively presumed to have been
made by all parties prior to him (holder in due course) [until the contrary is proven]
***Juan is a prior party and he warrants
Question #5
Q: If Harry decides to go against Juan will the latter be liable?
A: YES.
Reason: Juan as indorser warrants that he has a good title to the check (see: Sec. 65)
ANOTHER ILLUSTRATION OF SEC. 16
P80,000.00
Pay to the order of Juan eighty thousand pesos.
(Sgd) Pedro
T: Land Bank
Facts:
Pedro instructed Juan to indorse this check until such time the latter will be able to complete the construction of
Pedros house.
Construction has never started when Juan indorsed the check to Ruby.
Subsequently, Ruby indorsed the check to Clara.
BACK
To: Ruby
(Sgd) Juan
To: Clara
(Sgd) Ruby
Question #1
Q: If Clara is not a holder in due course can she require Pedro to pay after giving him notice of dishonor?
A: NO.
Pedro has a personal defense that there was no effectual delivery of the instrument considering that delivery was
conditional and the suspensive condition was not fulfilled. (Juan was not acting under the authority of Pedro).
Question #2
Q: Will your answer be the same as in the preceding question if Clara is a holder in due course?
A: NO. My answer is not the same as in the preceding question because Clara can require Pedro to pay because the law
provides that when the instrument is in the hands of a holder in due course a valid and intentional delivery by all
parties prior to him (holder in due course) so as to make them (prior parties) liable to her, is conclusively presumed.
(Clara holds the instrument as though there was a valid delivery from Pedro, Juan and Ruby)
Question #3
Q: As a holder in due course, can Clara require Juan to pay?
A: YES. Clara can require Juan to pay (*warranty of Juan extends beyond Ruby)
[See: Sec. 66, opening sentence (every indorser who indorses without qualification, warrants, to all subsequent
holders in due course ) in relation to Par(b) of Sec. 65 (that he has a good title to it)]
Juan is a general indorser and he warrants ALL SUBSEQUENT HOLDERS IN DUE COURSE that he has a good
title.
Question #4
Q: If Clara fails to find Pedro and Juan, can she require Ruby to pay?
A: YES. Clara can require Ruby to pay because the latter is a general indorser and such she warrants that the check is
genuine.
NOTES:
-Check is complete, therefore, negotiable.
-Delivery is conditional (ie: construction)
-The suspensive condition was not fulfilled, therefore, the delivery is NOT EFFECTUAL.
Juan was not acting under the authority of Pedro because of the non-fulfillment of the obligation, therefore, no
effectual delivery to Ruby (as far as Pedro is concern)
SEC. 14 vs SEC. 15 vs SEC. 16
Sec. 14
Sec. 15
1. INCOMPLETE instrument
1. INCOMPLETE
but DELIVERED.
instrument but
UNDELIVERED.
Sec. 16
1. COMPLETE instrument but UNDELIVERED
4. Cannot be enforced
even by one who is a
holder in due course.
Against whom? Any
person who became a
party prior to completion
or delivery.
Ans: NO. Berto can set up the real defense that the forged signature of Juan (payee) is wholly inoperative (that is using
the payees forged signature as a real defense).
Berto is not made liable even to a HOLDER IN DUE COURSE bec. of lack of valid indorsement by the payee.
2) If Harry gives NOD to Juan, is the latter liable?
Ans: NO. Reason: Forged signature is rendered wholly inoperative. Juan cant be made liable on the basis of that forged
signature.
As a holder (even HDC), Harry did not acquire any right to enforce the instrument against Juan.
3) If Harry gives a NOD to Pablo, is the latter liable?
Ans: YES. Reason: Pablo is the FORGER and SUBSEQUENT INDORSER. As such, he is precluded from setting up
forgery or want of authority. And he warrants that the instrument is genuine and in all respects what it purports to be.
Face
P60,000.00
Pay to REY or BEARER sixty thousand pesos.
(Sgd)
Pablo
To: PNBank
Back
To: Pedro
(Sgd) REY
To: Harry
Back
To: Nena
(Delivered by) Juan
To: Harry
(Sgd) Baldwin
To: BPI
Forged by Dolores
Back
To: Hongkong and Shanghai Bank (HSB)
(Sgd) Dolores in
behalf of SCMC
signature of the drawer was forged
DOCTRINE:
A bank (drawee bank) is BOUND to know the signature of its depositors (ie. The drawers). If it pays a forged check
(forged signature of the drawer), it is considered as making payment out of its own funds and cannot debit the amount so
paid against the account of the depositor(drawer) whose signature was forged.
Eg: BPI cannot debit the amount so paid against Baldwin account.
2) GELAC vs HK and Shanghai Bank, 43 Phil 711
Face
P2,000.00
Pay to the order of MELICOR
(Sgd)
GELAC
To: PNBank
Back
To: Maasim
(Sgd)
MELICOR
To: HSB
(Sgd)
Maasim
This was forged by Maasim
this check was drawn by GELAC involving payment of insurance proceeds for MELICOR.
This check was lost and Maasim had possession of the check and tried to make it appear that it was indorsed to him by
MELICOR.
The practice of GELAC is to send the check by mail.
8: order instrument payee must be named.
Maasim deposited the check to HSB and the amount was allowed to be credited in Maasims account, and so he was
allowed to withdraw amount.
HSB presented to PNB. PNB paid.
Now, PNB wants to debit against the deposit account of GELAC.
DOCTRINE:
When a check is payable to the order of a person and it is presented for payment BY ANOTHER it is the duty of
the bank to see to it that the check was duly indorsed by the original payee. (Reason: no valid indorsement)
So, PNB should see to it that MELICOR made a valid indorsement. It cannot debit against the account of GELAC.
***Forgery in the signature of the payee is a real defense by the drawer.
PNB can go against HSB; HSB can go against Maasim.
3) PNB vs Motor Service, 63 Phil 693
Face
Pay to the order of International Auto-repair Shop
(IARS) or ORDER.
(Sgd) J.
Klar
in behalf of
the PANTRANCO
To: PNB
This was forged
Back
To: Motor Service
(Sgd)
IARS
by
unknown person
To: Natl City Bank of New York (NCBNY)
(Sgd)
Motor Service
When PANTRANCO had repairs it went to IARS
There were two checks involved in this case.
NCBNY presented to PNB for payment then PNB paid NCBNY; PNB wanted to debit the amount against the account of
PANTRANCO.
PNB waived its rights to sue NCBNY thats why it sued Motor Service.
There was negligence on the part of PNB bec. it failed to see to it that the signature of J. Klar is GENUINE. So, PNB is
guilty of CONSTRUCTIVE NEGLIGENCE by not ascertaining of its drawers/depositors signature is genuine or forged.
Motor Service was negligent bec. it accepted indorsement of UNKNOWN PERSON. It should ascertain his identity. So, it
was guilty of ACTUAL NEGLIGENCE in accepting check from persons whose identity remains unknown.
Q: Who shall bear the loss then?
A: The one guilty of actual negligence.
SC: PNB can go against Motor Service and let Motor Service to go against the unknown person.
4) PNB vs CA, 25 SCRA
Face
Pay to the order of Mariano Pulido
(Sgd)
GSIS
To: PNBank
Back
To: Manuel Go
(Sgd)
M. Pulido
To: Lim
(Sgd)
M. Go
To: PCIB
(Sgd)
Lim
PCIB said: all prior indorsements guaranteed
Signatories of GSIS check are manager and auditor
Managers and Auditors signature were forged (this check was lost)
2 months before PCIB went to PNB. GSIS has already notified PNB to stop payment bec. GSIS said that the check was
forged (lost).
But PNB still paid bec. of the ANNOTATION: PCIB guaranteed that the indorsement were GENUINE but not the
signature.
SO, GSIS is not liable bec. its signature is wholly inoperative.
There was GREATER or ACTUAL NEGLIGENCE by PNB.
DOCTRINE OF JUS TERTIIS
When one of the two innocent persons must suffer from a wrongful act of a third person, the one guilty of actual
negligence or who put it into the power of a 3rd person to perpetrate the wrong shall bear the loss.
Here, the 3rd person is the GSIS.
5) Republic Bank vs. Mauricia Ebrada, 65 SCRA 693
Signature of payee (original indorser) was forged.
Ebrada also raised the issue that she was only an accommodation pary (29)
Check payable to the order of a specified person.
DOCTRINE
a person who takes a check or purchases draft is bound to satisfy himself that the check he is taking is genuine,
and by putting it into circulation, or by presenting it for payment or by indorsing it, he impliedly asserts that he has
performed his duty.
Face (GENUINE)
Pay to A or ORDER
(Sgd)
Y
To: Bank
Back (FORGED)
To: B
(Sgd)
A
(Sgd)
B
B presented this to the BANK.
B is the holder.
if B purchases a draft, B should believe in good faith that the check in his possession is genuine.
Drawee bank cannot debit account of Y.
Bank can go against B (basis: one who purchases a draft must satisfy himself that such draft is genuine)
Doctrine in GELAC is not applicable but the doctrine in Rep Bank vs Ebrada does not mean abandonment of ruling in
GELAC case.
6) Face
P10,000.00
Pay to the order of Inter Island Gas Services, Corp
(IGSP)
(Sgd) DD
To: VB
10 different drawers in various drawee banks
Back
To: Jai Alai
(Sgd)
IGSCorp
(by A.
Ramirez)
To: BPI
(Sgd)
Jai Alai
BPI credited amount of checks to the account of Jai Alai; VB does not pay.
Signature of Alfredo Ramirez was NOT AUTHORIZED (therefore, forgery)
NOTE: The payee is corporation a corporation can act only through its Board of Directors. The Board can authorize any
of the corporate employees or officers to act for in its behalf.
DOCTRINE:
A person taking a check of corporation (which can act only through its Board of Directors) does so on his own peril when
the one who indorses in behalf of the corporation was in fact not authorized.
If you are the holder, you cannot compel the drawee to pay BUT go against the indorsee, or the person who appear to
be secondarily liable.
bec. VB does not pay, BPI sued Jai Alai.
When Ramirez signed the checks in favor of Jai Alai, the latter should have verified the validity (ie. Authorization of
Ramirez) of the formers signature.
When Jai Alai accepted the checks from Ramirez, he did so in his own peril.\
7) PNB vs CA (1997)
Face
P80,000.00
Pay to the order of Ana eighty thousand pesos.
(Sgd) Pedro
To: X Bank
This signature was forged.
Back
To: Y Bank (indorsee)
(Sgd) Ana
(indorsed check to
Y Bank [indorser])
Y Bank presented payment by X Bank.
NOTE: X Bank is the drawee bank, Y Bank is the collecting bank (where the payee deposits/indorses the check)
Similar to Rep. Bank vs Ebrada case/doctrine.
DOCTRINE:
A collecting bank incurs the liability of the indorser (warrants the check is genuine)
MATERIAL ALTERATION
It is any unauthorized change in the instrument.
It includes:
a) Change in the amount payable.
b) Change in the maturity date.
c) Change in the number or relation.
d) Change in the nature of the instrument.
e) Adds interest when in fact not stipulated.
EFFECTS OF MATERIAL ALTERATION
1. The instrument is AVOIDED.
2. The instrument cannot be enforced against the party who did not authorize nor assented to the alteration.
3. A HDC can enforce the instrument according to its original tenor. [but not as altered; only the original]
4. Material alteration is a REAL DEFENSE.
Q: Who may be liable in case of alteration?
A: 1) The party who: a)made, b) authorized, c) assented to the alteration.
2) A subsequent indorser bec. of his warranty that the instrument is genuine and in all respects what it purports to be.
Alteration distinguished from forgery
Alteration
1. It refers to any unauthorized change.
Forgery
1. It pertains to unauthorized signature.
2. The forged signature is rendered INOPERATIVE.
Ans: YES. Failure of consideration is a personal defense and so that is not available to Juana against a HDC.
2) Suppose Harry is not a HDC, is Juana liable to pay?
Ans: NO. Juana is not liable bec. failure of consideration is a personal defense which she may avail against one who is
not a HDC.
3) Suppose only 3 carabaos equivalent to P30K were delivered by Jose to Juana, can Harry who is not a HDC require
Juana to pay P100,000.00?
Ans: NO. Juana has a defense PRO TANTO against the holder who is not a HDC.
How much could Juana be made liable?
She is liable as much as P30K bec. she has a defense pro tanto (reduced liability).
Sec. 60
Illustration:
Amado issued a promissory note payable to the order of Rey P20K. Rey indorsed this to Ronnie. Ronnie
presented this note for payment by Amado. Amado refused to pay bec. he contends that Rey is insane an so he could not
incur liability.
Is the contention of Amado tenable or not?
NOT tenable.
See: 60. The maker by making the instrument engages to pay according to its original tenor. The maker
ADMITS the existence of the payee and his then capacity to indorse.
Amado has admitted that Rey has the capacity to indorse. He is already precluded form contending the legal
capacity of the payee.