NEGOTIABLE INSTRUMENTS NOTES

BASED ON AGBAYANIS BOOK AND ATTY. MERCADOS LECTURES

Page 87 of 190


BY: MA. ANGELA LEONOR C. AGUINALDO
ATENEO LAW 2D BATCH 2010
circulation. When the drawee banks cashes or pays a check, the cycle of
negotiation is terminated and it is illogical thereafter to speak of
subsequent holders who can invoke the warrant against the drawee.

Further, in determining the relative rights of a drawee who under a mistake
of fact, has paid, a holder who has received such payment, upon a check to
which the name of the drawer has been forged, it is only fair to consider
the question of diligence and negligence of the parties in respect thereto.
The responsibility of the drawee who pays a forged check, for the
genuineness of the drawers signature is absolute only in favor of one who
has not, by his own fault or negligence, contributed to the success of the
fraud or to mislead the drawee.

According to the undisputed facts, National City Bank in purchasing the
papers in question from unknown persons without making any inquiry as to
the identity and authority of said persons negotiating and indorsing them,
acted negligently and contributed to the constructive loss of PNB in failing
to detect the forgery. Under the circumstances of the case, if the appellee
bank is allowed to recover, there will be no change in position as to the
injury or prejudice of the appellant.

DRAWER: PANGASINAN
PAYEE: IAS!MOTOR SERVICE
DRAWEE: PNB
COLLECTING BANK: NATIONAL CITY BANK OF NEW YORK

Sec. 63. When a person deemed indorser. - A person placing his
signature upon an instrument otherwise than as maker, drawer, or
acceptor, is deemed to be indorser unless he clearly indicates by
appropriate words his intention to be bound in some other
capacity.

WHEN PERSON DEEMED INDORSER
In the absence of any indication in what capacity a person whose
signature is written on the instrument intends to be bound, he shall be
deemed as an indorser

INDICATION TO BE BOUND OTHERWISE THAN INDORSER
Will not be deemed as an indorser if he indicates by appropriate words
his intention to be bound in some other capacity
But anyone who assumes the responsibility of identifying the payee of
a check is answerable to the bank cashing the check if the bank pays
its amount to such payee so identified

ADMISSIBILITY OF PAROL EVIDENCE
The statutory command that the legal effect of a blank instrument
cannot be changed by parol proof or by evidence from other source
The intent to be bound in some other capacity than as an indorser
must be indicated in the indorsement or on the face of the instrument
and cannot be shown by parol

CASE DIGESTS: SECTION 63

118 ANG TIONG V. TING
22 SCRA 713

Ting issued a PBCom check payable to cash or bearer. This was indorsed
by Ang at the back and it was received by plaintiff. Upon encashment of
the check, the same was dishonored. Plaintiff moved that the two make
good the value of the check but despite demands, he was unheeded,
prompting him to file a complaint. The trial court decided in his favor.

HELD:
There is nothing in the check in question indicates that the appellant is not
a general indorser.

When a person placing his signature upon an instrument otherwise than a
maker, drawer, or acceptor, he is deemed to be a general indorser, unless
he clearly indicates by appropriate words his intention to be bound in some
other capacity, which he did not do so.

Even on the assumption that the appellant was an accommodation
indorser, as he professes to be, he is nevertheless by the clear mandate of
section 29, liable on the instrument to a holder for value, notwithstanding
that such holder at the time of taking the instrument knew him to be an
accommodation party. And assuming that he was an accommodation
party, he may obtain security from the maker to protect himself against
the danger of insolvency of the latter but this doesn't affect his liability to
the appellee, as the said remedy is a matter of recourse between him and
the maker.

119 TUAZON V. HEIRS OF BARTOLOME RAMOS
463 SCRA 408

FACTS:
Respondents alleged that on a relevant date, spouses Tuazon purchased
from their predecessor-in-interest cavans of rice. That on the total number