H.

Duress:
Campos: Duress like fraud is one of those mentioned in section 55 as making the title of the person
employing it defective.

Normally therefore it is a personal defense which cannot be used to defeat the rights of a Holder in
Due course

there may be cases however where duress employed is so serious that it will give rise to a real
defense, because of the lack of contractual intent.

Although the signer may know what he is signing, there may be LACKING IN INTENT or willingness to
be bound.

Like in forgery and fraud in the execution, the signer may never had intended to be bound by the
contract.

If he acted not in accordance with his own will but in accordance with the will of another because of
his well founded fear of an imminent and serious injury, the defense of duress would be
REAL.
I. Complete instrument undelivered
Sec. 16. Delivery; when effectual; when presumed. Every contract on a negotiable instrument is incomplete and revocable until delivery of the instrument
for the purpose of giving effect thereto.
As between immediate parties and as regards a remote party other than a holder in due
course, the delivery, in order to be effectual, must be made either by or under the authority of the party
making, drawing, accepting, or indorsing, as the case may be; and, in such case,
the delivery may be shown to have been conditional, or for a special purpose only, and not for
the purpose of transferring the property in the instrument.
But where the instrument is in the hands of a holder in due course, a valid delivery thereof by all
parties prior to him so as to make them liable to him is conclusively presumed. And where the
instrument is no longer in the possession of a party whose signature appears thereon, a valid and intentional
delivery by him is presumed until the contrary is proved.
Non delivery of a complete instrument is only a personal defense.

Delivery of an instrument is a prerequisite for liability. If the instrument is complete in all its
particulars, but is not delivered, there is no contract.

However, if the instrument is no longer in the possession of a party who has signed it , a valid
delivery is presumed until the contrary is proved.

If the holder is a holder in due course, the instrument is not only merely prima facie deemed
delivered, but this fact is conclusively presumed.

Thus if a complete instrument is stolen from the maker or drawer and negotiated to a holder
in due course, such maker is or drawer cannot set up the defense of non delivery because it is a
personal defense available only between immediate parties and as regards prior parties who are not
holders in due course.

This is true even if the instrument is payable to bearer.

Similarly where the maker or drawer delivers a complete instrument payable to the order of X ot his
secretary for safekeeping, and the latter in violation of the maker's instructions, delivers the same to
X, X cannot recover from the maker in the face of proof that the delivery to the secretary was for a
special purpose only and not for the purpose of transferring property in the instrument.

However, should such instrument come into the hands of a HDC, the maker is liable to him regardless
of any proof of the lack of valid delivery.

This provision does not even govern the rights of a HDC of an incomplete instrument which has not
been delivered (Section 15).
I. Incomplete instrument delivered
Sec. 15. Incomplete instrument not delivered. - Where an incomplete instrument has not been delivered,
it will not, if completed and negotiated without authority, be a valid contract in the hands of any
holder, as against any person whose signature was placed thereon before delivery.
This section contemplates an instrument which is not only undelivered but also incomplete.

In this case a real defense exists and not even a holder in due course can recover on the instrument
for the law is specific that it is not a valid contract in the hands of any holder.

The conclusive presumption of delivery in section 16 cannot apply, although possession of an

incomplete instrument raises a prima facie presumption of delivery.

It may be difficult to locate the boundary between a complete and an incomplete instrument so as to
determine which sections apply.

If the instrument is complete then section 16 applies and lack of delivery may be proven and if so
proven not even a holder in due course can recover thereon against prior parties who had not
authorized its delivery and/or completion.

If the signed instrument is blank as to the payee or as to amount, it is clearly incomplete and
therefore covered by Section 15.

But where the instrument is complete except for the for the date of issue and is stolen from the owner
; or where the instrument has an unfilled blank as to atty fees but is otherwise complete?
In the last two cases the contract of the signer was complete except for minor details, which may
be supplied by the holder, in the case of the atty fees.
It would seem that if an instrument contains all the requisites for making it a negotiable
one, it should be considered as complete though it in fact may have blanks as to non essentials
so as to give rise to a conclusive presumption of delivery in favor of a HDC.
Although the fact that an incomplete instrument was undelivered is a real defense, the majority courts have
held that against a drawee bank , the drawer is estopped to rely on Section 15 if his negligent custody
of the checks after partial execution contributed to its escape.

Some courts even protect a holder in due course under the same circumstances although others
refuse to to do so and apply Section 15 strictly in favor of the issuer and against the holder in due
course, regardless of the former's negligence.

The reason by the latter courts is not treating the holder in due course and the drawee bank similarly
is that the antencedent contract relations which exist between a depositor and his bank operate to
impose a duty of care upon the depositor

but because the holder in due course is free to refuse the instrument without risk to himself, there is
no duty to owed by an obligor on a negotiable instrument to use care in the custody of
the instrument after partial execution.

In this connection note that Section 15 uses the words any holder thus impliedly excluding anyone
who is not a holder as defined in NIL. A drawee is not such a holder.
K. Incomplete instrument which has been delivered
Sec. 14. Blanks; when may be filled. - Where the instrument is wanting in any material particular, the person
in possession thereof has a prima facie authority to complete it by filling up the blanks therein.
And a signature on a blank paper delivered by the person making the signature in order that the
paper may be converted into a negotiable instrument operates as a prima facie authority to fill it up as such
for any amount.
In order, however, that any such instrument when completed may be enforced against any
person who became a party thereto prior to its completion, it must be filled up strictly in accordance
with the authority given and within a reasonable time.
But if any such instrument, after completion, is negotiated to a holder in due course, it is valid and
effectual for all purposes in his hands, and he may enforce it as if it had been filled up strictly in accordance
with the authority given and within a reasonable time.
This provision merely raises a personal defense. It covers two kinds of writings:
(1) incomplete instrument and
(2) a blank paper or a paper so far incomplete that it does not constitute an instrument within the
meaning of the definition of the term BUT signed.
INCOMPLETE INSTRUMENT writing which contains blanks but is so far completed tthat it is an instrument ie
where the writing recites enough formal requisites to make evident the intention to make such writing
operate as a negotiable instrument.

In such case any person in possession thereof has prima facie authority to complete it by filling up
the blanks therein.

this section contemplates a delivered instrument and NOT an undelivered instrument (sec 15)

therefore, a person in possession does not apply to a thief or finder but means a lawful possession
one to whom the instrument was delivered by the maker or drawer.
BLANK PAPER, INCOMPLETE, NOT INSTRUMENT - in this case two conditions must be present before the
presumption of authority to complete may arise:

(1) Delivery of the instrument and

(2) the delivery must have been for the purpose of converting it into a negotiable instrument.
Thus if the paper or writing is delivered without such intention, its subsequent conversion into a
negotiable insturment will not render the peson signing liable to any body, NOT EVEN TO A HDC.
The presence of such intention must be proven by the possessor of instrument.

Because of the presumption of authority, the burden of proving that there was no authority or that
authority granted was exceeded is placed on the person questioning such authority.
However even if such authority has been exceeded, if the instrument is in the hands of a HDC he may
enforce it as if it had been filled up strictly in accordance with the authority given.
If the H is not in DUE COURSE, then since the instrument was not filled up strictly in accordance with
the authority given, he cannot recover.
May he not recover upon the instrument as it would have been if it had been completed within the
authority granted?
He cannot, since the the law states that in order that such instrument when completed may be
enforced against any person who became a party thereto prior to its completion , it must be filled up
strictly in accordance with the authority given and within reasonable time.
To permit recovery to the extent of the authorized terms by a Holder not in due course would be
enforcing the instrument for such amount. The law in effect avoids the instrument in the hands
of any holder not in due course, and such holder is treated in the same way as a H not in DC of a
materially altered instrument.

A SIGNED BLANK PAPER the law provides that there is prima facie authority to fill it up for any amount.

Does this include authority to fill in other blanks? Yes, it does, specially as to all missing requirements
necessary to make it a negotiable instrument, since otherwise it would not be such an instrument.

Whether it is an incomplete instrument or a mere signed blank paper therefore, the authority
extends to the insertion of date , place of payment , the amount , the name of payee and
the time of payment.

While section 14 is broad enough to include the matter of filling in blanks for the time of payment,
Section 13 deals with more particularity some aspects of this right:
Sec. 13. When date may be inserted. - Where an instrument expressed to be payable at a fixed
period after date is issued undated, or where the acceptance of an instrument payable at a fixed
period after sight is undated, any holder may insert therein the true date of issue or acceptance, and
the instrument shall be payable accordingly. The insertion of a wrong date does not avoid the
instrument in the hands of a subsequent holder in due course; but as to him, the date so inserted is
to be regarded as the true date.

The insertion of a wrong date by one having knowledge of the true date of issue will avoid the
instrument as to him, but the innocent party may enforce the instrument notwithstanding the
improper date.
If an instrument is issued blank as to the payee's name, the first or subsequent holder may
insert his own name or the name of the person to whom he negotiates the instrument,
unless there is express authority to the contrary.
But unless authorized he cannot fill in a predecessor's name because that would entitle the
holder to compel his (predecessor;s) indorsement, thus enlarging the latter's liability beyond the
latter's contract.
He may however sue on the instrument without filling up the blank. In such a case, however, he
cannot claim the rights of a holder in due course.

The authority to fill in blanks or to complete the instrument is limited as to time. Section 14 in order to be
enforceable against a party prior to completion, it must be filled in within a reasonable time.
Such reasonable time must be reckoned from the time of the issuance and not from the time of
each successive negotiation, because the instrument involved therein is that of the issuer.

In determining what is reasonable time, section 193 provides that regard is to be had to the nature of
the instrument , usage of trade or business if any, with respect to such instruments, and the facts of
the particular case.

So no rigid rule can be laid down and each case will have to be considered individually.

However it should be noted that whether unrealized income has elapsed or not would be immaterial if
the user had expressly fixed the time in which completion may be made.
L. Consideration

Sec. 28. Effect of want of consideration. - Absence or failure of consideration is a matter of defense as
against any person not a holder in due course; and partial failure of consideration is a defense pro
tanto, whether the failure is an ascertained and liquidated amount or otherwise.
This provision reiterates the rule laid down by section 24 that every instrument is deemed prima facie to have
been issued for a valuable consideration. It is also consistent with the provision that the validity and
negotiable character of an instrument is not affected by the fact that it does not specify that any value has
been given therefor.

Under these rules the defendant has the burden of proving that there was no consideration for the
instrument.
But section 28 quoted above goes further and provides that absence or failure of consideration is a
personal defense available only against a holder not in due course . In the hands of a HDC therefore
the presumption of consideration is conclusive.

The acceptability of negotiable instruments would be greatly restricted if prospective purchaser were
burdened with the need of determining whether such instruments are supported by consideration.
Absence of consideration means total lack of consideration. Ex: As makes a PN payable to B as gift; there is
absence of consideration. As between A and B there can be no recovery on the note.

But if B negotiates it to C, a HDC , C can recover against A, because A's defense of absence of
consideration is personal.
Failure of consideration means something means that something was agreed upon as a consideration for a
contract but for some reason the consideration did not materialize.

A enters into a contract to sell certain merchandise to B. In consideration of this merchandise, B

makes a PN payable to A as advance payment thereof. A fails to deliver the merchandise. There is
failure of consideration, so that A cannot recover from B. If B negotiates the note to C, who knew that
A failed to deliver, neither can C recover from A. If C were ignorant of such defense and is a HDC, C
can recover from A.
Partial failure of consideration means simply that part of the consideration did not materialize. If A delivered
part of the merchandise and failed to deliver the rest, there is partial failure of consideration which may be
set up as a defense pro tanto by B against A or a holder not in due course , ie B is not liable to the extent of
the price of the undelivered portion.
M. Signature Under Trade Name Or Agency
Sec. 18. Liability of person signing in trade or assumed name. - No person is liable on the instrument whose
signature does not appear thereon, except as herein otherwise expressly provided. But one who signs in a
trade or assumed name will be liable to the same extent as if he had signed in his own name.
Sec. 19. Signature by agent; authority; how shown. - The signature of any party may be made by a duly
authorized agent. No particular form of appointment is necessary for this purpose; and the
authority of the agent may be established as in other cases of agency.
Sec. 20. Liability of person signing as agent, and so forth. - Where the instrument contains or a person
adds to his signature words indicating that he signs for or on behalf of a principal or in a
representative capacity, he is not liable on the instrument if he was duly authorized;
but the mere addition of words describing him as an agent, or as filling a representative character, without
disclosing his principal, does not exempt him from personal liability.
Notes: A person whose name does not appear upon the instrument may be held liable thereon if he or his
duly authorized agent has signed thereto a trade name under which such person engages in
business. This case does not constitute an exception to the rule which forbids any action on a negotiable
instrument against one whose name does not appear thereon, but rather it is an instance in which
defendant's business name serves the same purpose that would be served by the use of his
given name and surname.
19, 20 : the principal whose name is undisclosed on the instrument cannot be held liable thereon because
under section 18, no person is liable on the instrument unless his signature appears thereon.

In such case the signing agent will be personally liable either as a maker, acceptor, drawer, or
indorser, as the case may be.

Where an agent negotiates the instrument without indorsing it, and he does not disclose his principal
nor that he is merely an agent, he is liable like one who negotiates by delivery under Section 65 and
not as a general indorser under Section 66.