NEGOTIABLE INSTRUMENTS NOTES

BASED ON AGBAYANIS BOOK AND ATTY. MERCADOS LECTURES

Page 84 of 190


BY: MA. ANGELA LEONOR C. AGUINALDO
ATENEO LAW 2D BATCH 2010
Sec. 61. Liability of drawer. - The drawer by drawing the
instrument admits the existence of the payee and his then capacity
to indorse; and engages that, on due presentment, the instrument
will be accepted or paid, or both, according to its tenor, and that if
it be dishonored and the necessary proceedings on dishonor be
duly taken, he will pay the amount thereof to the holder or to any
subsequent indorser who may be compelled to pay it. But the
drawer may insert in the instrument an express stipulation
negativing or limiting his own liability to the holder.

DRAWER SECONDARILY LIABLE
He engages merely that the bill will be accepted or paid or both,
according to its tenor, and that he will pay only when
1. It is dishonored
2. And the necessary proceedings of dishonor are duly taken
The liability of the drawer is subject to the two conditions and attaches
only upon their fulfillment
The drawer, by merely drawing the bill and signing his name in the bill
as such drawer, without more, impliedly engages to be so secondarily
liable, as if he has incorporated the provisions of Section 61 in the bill
If the bill is not paid, accordingly, if a bill is not paid, the drawer
becomes liable for the payment of its value to the holder provided that
notice of dishonor is given

TO WHOM DRAWER IS SECONDARILY LIABLE
1. The holder
2. Or if any of the indorsers intervening between the holder and the
drawer is compelled to pay by the holder, the drawer, will be liable
to that indorser so compelled to pay

IS DRAWER OF UNACCEPTED BILL PRIMARILY LIABLE?
Yes
It was held that until the bill has been accepted, the drawer is the
principal debtor and after acceptance, the drawee or acceptor is the
principal debtor and the drawer becomes secondarily liable

PAYEES EXISTENCE
Like the maker, the drawer admits to the existence of the payee and
his capacity to indorse

NEGATIVES HIS LIABILITY
The law allows the drawer to negative or limit his liability by express
stipulation
By adding words such as without recourse or I shall not be liable in
case of non-payment or non-acceptance

CASE DIGESTS: SECTION 61

113 PNB V. PICORNELL
46 PHIL 706

FACTS:
Picornell followed the instructions of Hyndman, Tavera and Venutra by
buying bales of tobacco. He was able to obtain in National Bank a sum of
money together with his commission. He drafted a bill of exchange against
the firm and in favor of the bank. It was received by National Bank and
was accepted thereafter by the firm. However, on alleged conditions of the
tobacco, the bill of exchange was not paid.

HELD:
This action for recovery is for the value of the bill of exchange. The firm
accepted the bill unconditionally but did not pay it at maturity, wherefore
its responsibility to pay the same is clear. The question whether or not the
tobacco was worth the value of the bill doesnt concern the bank. Such
partial want of consideration if it was, doesnt exist with respect to the
bank which paid Picornell the full value of the said bill of exchange. The
bank was a holder in due course, and was such for value full and complete.
The firm cannot escape liability.

114 BANCO ATLANTICO V. AUDITOR GENERAL
81 SCRA 335

FACTS:
Boncan was the Finance Officer of the Philippine Embassy in Madrid who on
many occasions negotiated with Banco Atlantico checks, allegedly endorsed
to her by the embassy. On these occasions, the bank allowed the payment
of the checks, notwithstanding the fact that the drawee bank has not yet
cleared the checks for collection. This was premised on the finding that
Boncan had special relations with the employees of the bank. And that
upon presentment to the drawee bank, the checks were dishonored due to
non-acceptance allegedly on the ground that the drawer has ordered the
stoppage of payment. This prompted Banco Atlantico to collect from the
Philippine Embassy for the funds released to Boncan but the latter refused.
This eventually led to filing of money claim of the bank with the Auditor
General.

HELD: