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Michaella Placida J.

Tumaneng
Negotiable Instruments Law -Final Exam

I.

1.
Under Section 119 of the Negotiable Instrument Law, a Negotiable Instrument is
discharged by the following methods:

(a) By payment in due course by or on behalf of the principal debtor;

(b) By payment in due course by the party accommodated, where the instrument is made or
accepted for his accommodation;

(c) By the intentional cancellation thereof by the holder;

(d) By any other act which will discharge a simple contract for the payment of money;

(e) When the principal debtor becomes the holder of the instrument at or after maturity in his
own right.

2.
A notice of dishonor is given to inform the parties secondarily liable that the maker or
acceptor has failed to meet his engagement and to advise them that they are required to make
payment. The purpose of this is to enable the party, whom the holder wishes to charge, to
preserve and enforce his rights against prior parties. The notice preserves the right of the holder
to recover on the instrument and enforce the liability of the drawer or indorsers thereon.

3.
Section 129 of the negotiable Instruments Law provides that an inland bill of exchange is
a bill which is, or on its face purports to be, both drawn and payable within the Philippines. Any
other bill is a foreign bill. Unless the contrary appears on the face of the bill, the holder may treat
it as an inland bill.
Moreover, Inland Bills are written in common and local language of the country, while a
foreign bill is written in English or in the language of the country of the drawer.

4. I will acquit Dwight . The Bouncing checks law punishes the act of making, drawing and
issuing of a worthless check or one that is dishonored upon its presentment for payment with
knowledge that he has no sufficient funds to cover the payment of such and with wriiten notice
of dishonor. The act is malum prohibitum, which is inimical to public welfare.
In the case at bar, one of the essential elements that a written notice of dishonor must
be given was not met, since frank was only informed through a text message. Therefore Frank
must be acquitted.
5. Frank will not be directed to pay. The case filed was a criminal case of BP 22 to which
he was acquitted since the law does not punish non payment for debt. The issue of the case is
the guilt or the innocence of the person charged. But since Frank was given a notice of dishonor
, his liabilities in accordance to his warranties was already activated upon the receipt of such
and thus he becomes primarily liable. He may be charged in another action for the collection of
the sum he owes.

6.
The Supreme Court ruled in the case of Lozano vs Martinez that BP 22 does not violate
the provision of the Constitution against the non-imprisonment for non-payment of debts. The
gravamen of the offense punished by BP 22 is the act of making and issuing a worthless check
or a check that is dishonored upon its presentation for payment. It is not the non-payment of an
obligation which the law punishes. The law is not intended or designed to coerce a debtor to pay
his debt. The thrust of the law is to prohibit, under pain of penal sanctions, the making of
worthless checks and putting them in circulation. Because of its deleterious effects on the public
interest, the practice is proscribed by the law. The law punishes the act not as an offense
against property, but an offense against public order. SC held that BP 22 does not conflict with
the constitutional inhibition against imprisonment for debt.
Moreover, the Supreme Court did not find substance in the claim that the statute in
question denies equal protection of the laws or is discriminatory, since it penalizes the drawer of
the check, but not the payee. It is contended that the payee is just as responsible for the crime
as the drawer of the check, since without the indispensable participation of the payee by his
acceptance of the check there would be no crime. This argument is tantamount to saying that,
to give equal protection, the law should punish both the swindler and the swindled
And lastly, there is no valid ground to sustain the contention that BP 22 impairs freedom
of contract. The freedom of contract which is constitutionally protected is freedom to enter into
"lawful" contracts. Contracts which contravene public policy are not lawful. Besides, we must
bear in mind that checks can not be categorized as mere contracts. It is a commercial
instrument which, in this modem day and age, has become a convenient substitute for money; it
forms part of the banking system and therefore not entirely free from the regulatory power of the
state.

7.
a.The bill of exchange must be presented first to the person whose name is on the face
of the negotiable instrument which is A, Since in the given facts, A is only an accommodation
party, it is incumbent upon him to prove that A draw the instrument to accommodate B.

b. The notice of Dishonor by A by either non-acceptance or non-payment, notice of


such dishonor must be given to persons secondarily liable, as the case may be.
Otherwise, such parties are discharged, It is upon A who seeks to enforce Bs liability
upon a negotiable instrument as endorser or the accommodated party to establish said liability
by proving that notice was given to A and the persons secondarily liable within the time and in
the manner required by the law that the instrument in question had been dishonored .

c. The discharge of the Instrument may effectuate when the following circumstances
happen based of the laws on the Negotiable Instrument such as ; (a) By payment in due course
by or on behalf of the principal debtor; (b) By payment in due course by the party
accommodated, where the instrument is made or accepted for his accommodation; (c) By the
intentional cancellation thereof by the holder; (d) By any other act which will discharge a simple
contract for the payment of money; (e) When the principal debtor becomes the holder of the
instrument at or after maturity in his own right.

II.

1.
Presentment means the production of a bill of exchange to the drawee for his
acceptance, or to the drawee or acceptor for payment; or the production of a promissory note to
the party liable for its payment.

2.
A Stale Check is one which has not been presented for payment within a reasonable
time after its issue. It is valueless and thus, should not be paid. A check becomes stale 6
months from date of issue.

3.
A crossed check is a check with two parallel lines, written diagonally on the upper right
corner thereof. It is a warning to the drawee bank that payment must be made to the right party,
otherwise the bank has no authority to use the drawers fund deposited with the bank . To be
assured that it will avoid any mistake in paying to the wrong party, banks adopted the policy that
crossed checks must be deposited in the payees account.

4.
Acceptance is the signification of drawee of his assent to the order of drawer. The
acceptance must be in writing and signed by the drawer. It must not express that drawee will
perform his promise by any other means than payment of money. Liability of aan acceptor is the
same as that of maker in a promissory note. Hence, the net effect of acceptance is the
conversion of a bill of exchange into a promissory note.

5.
A protest is a formal statement in writing made by a notary under his seal of office, at
the request of the holder of a bill, in which it is declared that the same was on a certain day
presented for payment or acceptance as the case may be, and such payment was refused
whereupon the notary protests against all parties to such instrument, and declares that they will
be held responsible for all loss or damages arising from its dishonor.
III.

1. b
2. b
3. c
4. b
5. a
6. a
7. b
8. d
9. c
10. a