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EH ROOM 403
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EH ROOM 403
d.) When the name of the payee does not
purport to the the name of any person or
e.) When the only or last indorsment is an
indorsement in blank
Q: Give an example of When it is payable to the order of
a fictitious person or non-existing person and such facts
was known to the person making it so payable
A: Example:
Examples:
o I promise to pay Teddy, or bearer 1 M on
Christmas. Non-negotiable
o I promise to pay Bear, or bearer 1 M on
Christmas 2016 negotiable.
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sgd Y
Q: is Y here a drawer or maker?
A: It is a maker. In the face of the instrument sir, It
doesnt mean sir just because the word order is there in
the above example it automatically becomes a bill of
exchange because sir the law says that it is a bearer
instrument and it is a promissory note
EH ROOM 403
PREVIOUS EXAMPLE:
I promise to pay Iron man or order P1M on or
before Christmas of 2016
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EH ROOM 403
EXAMPLE:
TO: X
A:Bill of exchange.
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Gocuan really is a family name. Thus, they will then
consider it negotiable then. And so, there has to be
words of negotiability. In fact, there are authors who
explain it clearly that only the first 2 examples in
SECTION 9 are deemed BEARER INSTRUMENTS on its
face. All the rest are order instruments. You need to
actually see here the word order for it to be considered
negotiable. The exception would be when it is pay to
cash because that has long been accepted.
Q:Now, lets go to the last (e). When do we say that the
last indorsement is an indorsement in blank? When do
we see this indorsement?
A: at the back of the instrument.
ATTY AMAGO: When we say that the instrument is
indorsed, something is written at the back, someone
signs at the back. Another difference between a bearer
instrument and an order instrument, is that a bearer
instrument need not be indorsed. It can be negotiated
by mere delivery. (action2x silag pasa pasa ug papil)
A: Order instrument.
Q: It is an order instrument because it requires an
indorsement but it just so happens that the last one is in
blank. What does that mean?
A: It does not specify to whom it should be delivered but
it contains a signature of the bearer or whoever is
holding it.
FRONT:
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Q: So the first person who will take hold of the
instrument after Y will be P. So what will P do now? He
will either go to X or negotiate
it. How does he do
that?
A: He will sign at the back.
To X
Pay to P or order.
BACK:
Sgd. P
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Pay to the order of P the amount of
Php1,000,000.
(Sgd.) Y
*Here, X is the drawee, Y is the drawer, and P is the
payee.
ATTY AMAGO: There is a third person in this case
because P is not the drawer and not the drawee. The
payee can also be a person who is not the maker of the
instrument.
Example:
I promise to pay to the order of P Php10,000.
(Sgd.) L
ATTY AMAGO: Sec. 8(b) When the instrument is drawn
payable to the order of the drawer or maker.
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Example 2:
o To: X
Pay to the order of myself Php1,000,000.
(Sgd.) Y
Example:
o To: X
Pay to X or order Php1,000,0000.
(Sgd.) Y
*X is the drawee who happens to be the payee as well.
o To: X
Pay to myself or order Php1,000,000.
(Sgd.) Y
Q: Is this negotiable?
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S: (inaudible)
Q: You actually count just the credits. Because joint can
either be on the part of the creditor and can also be on
the part of the debtor. A joint obligation is actually
defined as an obligation where there are as many debts
as there are parties. So in this case, you would know that
it is payable to joint payees when it uses the word and.
EH ROOM 403
Example: Pay to the order of the Professor of NIL in
EH403.
The designation must be specific. It has to refer to a
position which can be occupied by one person alone.
It is only true for that particular period. Example
President of the Philippines, Secretary of Justice or
simply pay to the treasurer or his order. Treasurer in
this example refers to the office and not to the
person.
Sir: The last requirement for negotiability of an instrument
is, Where the instrument is addressed to a drawee, he must
be named or otherwise indicated therein with reasonable
certainty. And this applies only to bills of exchange and we
would know when it is a bill of exchange if there is an
unconditional order to pay a sum certain in money. Can a
promissory note be an order instrument?
Yes. You separate the order in requirement no. 2
and no. 4.
Sir: Can a promissory note be a bearer instrument?
Yes.
Sir: Can a bill of exchange be an order instrument? Can it be
a bearer instrument?
Yes because that 4th requirement applies to both
promissory note and bill of exchange. So do not get
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documents evidencing the guarantee agreement, etc. In
1983, de la Cruz loan matured and the bank set-off and
applied the time deposits as payment for the loan. Caltex
filed the complaint, but which was dismissed.
Issues:
1. Whether the CTDs are negotiable instruments.
2. Whether the CTDs negotiation require delivery only.
Held:
1. The CTDs in question meet the requirements of the law
for negotiability. Contrary to the lower courts findings, the
CTDs are negotiable instruments. Negotiability or nonnegotiability of an instrument is determined from the
writing and language used, i.e. from the face of the
instrument itself. The documents provided that the
amounts deposited shall be repayable to the depositor. The
amounts are to be repayable to the bearer of the
documents, i.e. whosoever may be the bearer at the time
of presentment.
2. Although the CTDs are bearer instruments, a valid
negotiation thereof for the true purpose and agreement
between it (Caltex) and de la Cruz requires both delivery
and indorsement; as the CTDs were delivered to it as
security for dela Cruz purchases of its fuel products, and
not for payment. Herein, there was no negotiation in the
sense of a transfer of title, or legal title, to the CTDs in
which situation mere delivery of the bearer CTDs would
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IMPORTANCE:
Thats why class it is important that when I ask you
what a negotiable instrument is, you should say that it is a
instrument used in commercial transaction which complies
with the requirements in Section 1. Because it this case
says that even if the document complies with the
requirement of Section 1, such document was held non
negotiable because it was not used in commercial
transaction. Thus, cannot be negotiated.
METROBANK VS. CA
The treasury warrants are not negotiable instruments.
Clearly stamped on their face is the word: non negotiable.
Moreover, and this is equal significance, it is indicated that
they are payable from a particular fund, to wit, Fund 501.
An instrument to be negotiable instrument must contain an
unconditional promise or orders to pay a sum certain in
money.
As provided by Sec 3 of NIL an unqualified order or
promise to pay is unconditional though coupled with: 1st,
an indication of a particular fund out of which
reimbursement is to be made or a particular account to be
debited with the amount; or 2nd, a statement of the
transaction which give rise to the instrument. But an order
to promise to pay out of particular fund is not
unconditional. The indication of Fund 501 as the source of
the payment to be made on the treasury warrants makes
the order or promise to pay not conditional and the
warrants themselves non-negotiable. There should be no
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EH ROOM 403