SECTION 1.Form of Negotiable Instruments.

An instrument to be negotiable must conform to the following requirements:

(a)It must be in writing and signed by the maker or drawer;
(b)Must contain an unconditional promise or order to pay a sum certain in money;
(c)Must be payable on demand, or at a fixed or determinable future time;
(d)Must be payable to order or to bearer; and
(e)Where the instrument is addressed to a drawee, he must be named or otherwise indicated therein with reasonable certainty.
BPI Express Card
A check is only a substitute for money and not money, the delivery of such as instrument does not, by itself operate as payme nt. The
Corp. v. CA
issuance of PDC is not an effective payment. The corporation was justified in suspending his credit card.
Caltex v. CA
Certificates of time deposit
The certificates of time deposit are negotiable instruments. Negotiability or non negotiability of an instrument is determined from the
writing (from the face of the instrument). The documents provided that the amounts deposited shall be repayable to the depositor.
The negotiability or non-negotiability of an instrument is determined in writing, that is, from the face of the instrument. In the
construction of a bill or note, the intention of the parties is to control, if it can be legally ascertained. The duty of the court is to
ascertain, not what the parties may have secretly intended, but what is the meaning of the words they have used. What they ha ve
constituted in their writing is the outward and visible expression of their meaning, no words are to be added to it or substituted in its
stead.
For the parol evidence rule to apply, a written contract need not be in any particular form, or be signed by both parties. As a general
rule, bills, notes and other instruments of a similar nature are not subject to be varied or contradicted by parol or extrinsic evidence.
A certified personal check is not a legal tender, nor the currency stipulated and therefore cannot constitute valid tender of payment.

Inciong v. CA
Roman Catholic of Malolos
v. IAC

A check, whether a managers check or ordinary check, is not a legal tender, and an offer of a check in payment of a debt of a debt is
not a valid tender of payment and may be refused receipt by the creditor. The subsequent consignation did not operate to discharge
respondent from obligation.
Serrano v. IAC
Sesbreno v. CA

Stamped non-negotiable

An instrument (bill of lading), though marked non negotiable, may nevertheless be assigned or transferred, absent any e xpress
prohibition written in the face of the instrument. Non negotiable not the same as non-transferrable or non-assignable.

SECTION 2.Certainty as to Sum; What Constitutes. The sum payable is a sum certain within the meaning of this Act, although it is to be paid
(a)With interest; or
(b)By stated installments; or
(c)By stated installments, with a provision that upon default in payment of any installment or of interest the whole shall become due; or
(d)With exchange, whether at a fixed rate or at the current rate; or
(e)With costs of collection or an attorney's fee, in case payment shall not be made at maturity.
Bachrach v. Golingco
SECTION 3.When Promise is Unconditional. An unqualified order or promise to pay is unconditional within the meaning of this Act, though coupled with

(a)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
(b)A statement of the transaction which gives rise to the instrument.
But an order or promise to pay out of a particular fund is not unconditional.
Abubakar v. Auditor
General

Treasury warrant

Treasury warrant is not a negotiable instrument, it being an order of payment out of a particular fund. It is not unconditional and does not fulfill one
of the essential requirements.
A treasury warrant issued in favor of a public officer or employee but indorsed to and held by a private individual, may not be redeemed out of an
appropriation specifically for "treasury warrants issued . . . in favor of and held in possession by private individuals."

Metropolitan Bank vs. CA

SECTION 4.Determinable Future Time; What Constitutes. An instrument is payable at a determinable future time, within the meaning of this Act, which is expressed to be pa yable
(a)At a fixed period after date or sight; or
(b)On or before a fixed or determinable future time specified therein; or
(c)On or at a fixed period after the occurrence of a specified event, which is certain to happen, though the time of happening be uncertain.
An instrument payable upon a contingency is not negotiable, and the happening of the event does not cure the defect.
SECTION 5.Additional Provision Not Affecting Negotiability. An instrument which contains an order or promise to do any act in addition to the payment of money is not negotiable.
But the negotiable character of an instrument otherwise negotiable is not affected by a provision which
(a)Authorizes the sale of collateral securities in case the instrument be not paid at maturity; or
(b)Authorizes a confession of judgment if the instrument be not paid at maturity; or
(c)Waives the benefit of any law intended for the advantage or protection of the obligor; or
(d)Gives the holder an election to require something to be done in lieu of payment of money.
But nothing in this section shall validate any provision or stipulation otherwise illegal.
Philippine National Bank v.
Manila Oil Refining

SECTION 5 (b) OF negotiable Instrument otherwise negotiable is not affected by a provision which authorizes a confession of judgment
if the instrument be not paid at maturity, cannot be taken to sanction judgments by confession.
In the absence of express legislative sanction, provisions in notes authorizing attorneys to appear and confess judgments against makers
should not be recognized in this jurisdiction by implication.
A provision in a promissory note whereby in case the same is not paid at maturity, the maker authorizes any attorney to appear and
confess judgment thereon for the principal amount, with interest, costs, and attorney's fees, and waives all errors, rights to inquisition,
and appeal, and all property exemptions, is not valid in this jurisdiction.

SECTION 6.Omission; Seal; Particular Money. The validity and negotiable character of an instrument are not affected by the fact that

(a)It is not dated; or

(b)Does not specify the value given, or that any value has been given therefor; or
(c)Does not specify the place where it is drawn or the place where it is payable; or
(d)Bears a seal; or
(e)Designates a particular kind of current money in which payment is to be made. cdrep
But nothing in this section shall alter or repeal any statute requiring in certain cases the nature of the consideration to be stated in the instrument.
SECTION 7.When Payable on Demand. An instrument is payable on demand
(a)Where it is expressed to be payable on demand, or at sight, or on presentation; or
(b)In which no time for payment is expressed.
Where an instrument is issued, accepted, or indorsed when overdue, it is, as regards the person so issuing, accepting, or indorsing it, payable on demand.
SECTION 8.When Payable to Order. The instrument is payable to order where it is drawn payable to the order of a specified person or to him or his order. It ma y be drawn payable to
the order of
(a)A payee who is not maker, drawer, or drawee; or
(b)The drawer or maker; or
(c)The drawee; or
(d)Two or more payees jointly; or
(e)One or some of several payees; or
(f)The holder of an office for the time being. cdpr
Where the instrument is payable to order the payee must be named or otherwise indicated therein with reasonable certainty.
Consolidated Plywood v.
IFC Leasing
Equitable Banking v. IAC

AMBIGUITY IN THE CONTRACT SHALL BE CONSTRUED AGAINST THE PARTY WHO CAUSED IT. The
subject check was equivocal and patently ambiguous. By making the check read; "Pay to the EQUITABLE BANKING
CORPORATION Order of A/C OF CASVILLE ENTERPRISES, INC." the payee ceased to be indicated with reasonable
certainty in contravention of Section 8 of the Negotiable Instruments Law. As worded, it could be accepted as deposit to the
account of the party named after the symbols "A/C," or payable to the Bank as trustee, or as an agent, for Casville
Enterprises, Inc., with the latter being the ultimate beneficiary. That ambiguity is to be taken contra proferentem that is,
construed against NELL who caused the ambiguity and could have also avoided it by the exercise of a little more care. In the

GSIS v. CA

PECO v. Soriano

Postal money orders

Salas v. CA

last analysis, it was NELL's own acts, which put it into the power of Casals and Casville Enterprises to perpetuate the fraud
against it and, consequently, it must bear the loss.
The promissory note hereinbefore quoted, as well as the mortgage deeds subject of this case, are clearly not negotiable
instruments. These documents do not comply with the fourth requisite to be considered as such under Section 1 of Act No.
2031 because they are neither payable to order nor to bearer. The note is payable to a specified party, the GSIS. Absent the
aforesaid requisite, the provisions of Act No. 2031 would not apply, governance shall be afforded, instead, by the provisions
of the Civil Code and special laws on mortgages.
The weight of authority in the United States is that postal money orders are not negotiable, the reason behind this rule being
that, in establishing and operating a postal money order system, the government is not engaging in commercial transactions
but merely exercises a governmental power for the public benefit. It is to be noted in this connection that some of the
restrictions imposed upon money orders by postal laws and regulations are inconsistent with the character of negotiable
instruments. For instance, such laws and regulations usually provide for not more than one endorsement; payment of money
orders may be withheld under a variety of circumstances.
The questioned promissory note shows that it is a negotiable instrument, having complied with the requisites under the law as
follows: [a] it is in writing and signed by the maker Juanita Salas; [b] it contains an unconditional promise to pay the amount
of P58,138.20; [c] it is payable at a fixed or determinable future time which is "P1,614.95 monthly for 36 months due and
payable on the 21st day of each month starting March 21, 1980 thru and inclusive of Feb. 21, 1983;" [d] it is payable to
Violago Motor Sales Corporation, or order and as such, [e] the drawee is named or indicated with certainty.
the instrument in order to be considered negotiable must contain the so-called "words of negotiability i.e., must be payable
to 'order' or 'bearer.'" Under Section 8 of the Negotiable Instruments Law, there are only two ways by which an instrument
may be made payable to order. There must always be a specified person named in the instrument and the bill or note is to be
paid to the person designated in the instrument or to any person to whom he has indorsed and delivered the same. Without the
words "or order" or "to the order of", the instrument is payable only to the person designated therein and is therefore nonnegotiable. Any subsequent purchaser thereof will not enjoy the advantages of being a holder of a negotiable instrument, but
will merely "step into the shoes" of the person designated in the instrument and will thus be open to all defenses available
against the latter.

SECTION 9.When Payable to Bearer. The instrument is payable to bearer

(a)When it is expressed to be so payable; or
(b)When it is payable to a person named therein or bearer; or
(c)When it is payable to the order of a fictitious or non-existing person, and such fact was known to the person making it so payable; or
(d)When the name of the payee does not purport to be the name of any person; or
(e)When the only or last indorsement is an indorsement in blank.
Ang Tek Lian v. CA
A check payable to the order of "cash to the person presenting it for payment without the drawer's indorsement.
PNB v. Rodriguez &
Rodriguez
SECTION 10.Terms, When Sufficient. The instrument need not follow the language of this Act, but any terms are sufficient which clearly indicate an intention to conform to the requirements hereof.
Jimenez v. Bucoy
An acknowledgment of a debt becomes a promise to pay by the addition of words implying a promise of payment,
such as, "payable," "payable on a given day," "payable on demand".
Loans contracted and payable during the Japanese occupation should be paid according to the Ballantyne
schedule. However, if the loan was expressly agreed to be payable after the war, peso-for-peso payment shall be
ordered in Philippine currency.

SECTION 11.Date, Presumption As To. Where the instrument or an acceptance or any indorsement thereon is dated, such date is deemed prima facie to be the true date of the making,
drawing, acceptance, or indorsement, as the case may be.
SECTION 12.Antedated and Postdated. The instrument is not invalid for the reason only that it is antedated or postdated, provided this is not done for an illegal or fraudulent purpose.
The person to whom an instrument so dated is delivered acquires the title thereto as of the date of delivery.
SECTION 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.
Pacheco v. CA

required petitioners to issue an undated check as

an evidence of the loan, which allegedly will not
be presented to the bank; defaulted; required to
put a date though informed account closed;
dishonored; filed for estafa.

The Court ruled that a check has the character of negotiability and at the same time it constitutes an evidence of
indebtedness. By mutual agreement of the parties, the negotiable character of a check may be waived and the
instrument may be treated simply as proof of an obligation. There cannot be deceit on the part of the obligor,
petitioners herein, because they agreed with the obligee at the time of the issuance and postdating of the checks that
the same shall not be encashed or presented to the banks. As per assurance of the lender, the checks are nothing but
evidence of the loan or security thereof in lieu of and for the same purpose as a promissory note. By their own
covenant, therefore, the checks became mere evidence of indebtedness. It has been ruled that a drawer who issues a
check as security or evidence of investment is not liable for estafa.
As holder of the check, he could have inserted the date pursuant to Section 13 of the Negotiable Instrument Law
(NIL). Moreover, as stated in Section 14 thereof, complainant, as the person in possession of the check, has prima
facie authority to complete it by filling up the blanks therein. Besides, pursuant to Section 12 of the same law, a
negotiable instrument is not rendered invalid by reason only that it is antedated or postdated.
A check must be presented within a reasonable time from issue. By current banking practice, a check becomes stale
after more than six (6) months. In fact a check long overdue for more than two and one-half years is considered stale.

SECTION 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 accordanc e with the authority given and within a reasonable time.
SECTION 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.
SECTION 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 giv ing 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.
Dela Victoria v. Burgos
As Assistant City Fiscal, the source of the salary of Mabanto Jr., is public funds. He receives his compensation in the
form of checks from the Department of Justice through petitioners City Fiscal of Mandaue City and head of office.
Under Sec. 16 of the Negotiable Instruments Law, every contract on a negotiable instrument is incomplete and
revocable until delivery of the instrument for the purpose of giving effect thereto. As ordinarily understood, delivery
means the transfer of the possession of the instrument by the maker or drawer with intent to transfer title to the
payee and recognize him as the holder thereof. According to the trial court, the checks of Mabanto, Jr., were already
released by the Department of Justice duly signed by the officer concerned through petitioner and upon service of
the writ of garnishment by the sheriff petitioner was under obligation to hold them for the judgment creditor. It
recognized the role of petitioner as custodian of the checks. At the same time however it considered the checks as no
longer government funds and presumed delivered to the payee based on the last sentence of Sec. 16 of the
Negotiable Instruments Law which states: "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." Yet, the presumption is not

Development Bank of Rizal

v. Sima Wei

Manuel Lim v. CA

conclusive because the last portion of the provision says "until the contrary is proved." However this phrase was
deleted by the trial court for no apparent reason. Proof to the contrary is its own finding that the checks were in the
custody of petitioner. Inasmuch as said checks had not yet been delivered to Mabanto, Jr., they did not belong to him
and still had the character of public funds. In Tiro v. Hontanosas (No. L-32312, 25 November 1983, 125 SCRA 697)
we ruled that The salary check of a government officer or employee such as a teacher does not belong to him
before it is physically delivered to him. Until that time the check belongs to the government. Accordingly, before
there is actual delivery of the check, the payee has no power over it; he cannot assign it without the consent of the
Government. As a necessary consequence of being public fund, the checks may not be garnished to satisfy the
judgment. The rationale behind this doctrine is obvious consideration of public policy. The Court succinctly stated in
Commissioner of Public Highways v. San Diego (No. L 30098, 18 February 1970, 31 SCRA 616) that The
functions and public services rendered by the State cannot be allowed to be paralyzed or disrupted by the diversion
of public funds from their legitimate and specific objects, as appropriated by law.
A negotiable instrument, of which a check is, is not only a written evidence of a contract right but is also a species of
property. Just as a deed to a piece of land must be delivered in order to convey title to the grantee, so must a
negotiable instrument be delivered to the payee in order to evidence its existence as a binding contract. Section 16 of
the Negotiable Instruments Law, which governs checks, provides in part: "Every contract on a negotiable instrument
is incomplete and revocable until delivery of the instrument for the purpose of giving effect thereto. . . ." The payee
of a negotiable instrument acquires no interest with respect thereto until its delivery to him. Delivery of an
instrument means transfer of possession, actual or constructive, from one person to another. Without the initial
delivery of the instrument from the drawer to the payee, there can be no liability on the instrument. Moreover, such
delivery must be intended to give effect to the instrument.
Under Sec. 191 of the Negotiable Instruments Law the term "issue" means the first delivery of the instrument
complete in form to a person who takes it as a holder. On the other hand, the term "holder" refers to the payee or
indorsee of a bill or note who is in possession of it or the bearer thereof.
Although LINTON sent a collector who received the checks from petitioners at their place of business in Kalookan
City, they were actually issued and delivered to LINTON at its place of business in Balut, Navotas. The receipt of
the checks by the collector of LINTON is not the issuance and delivery to the payee in contemplation of law. The
collector was not the person who could take the checks as a holder, i.e. as a payee or indorsee thereof, with the intent
to transfer title thereto. Neither could the collector be deemed an agent of LINTON with respect to the checks
because he was a mere employee.

San Miguel Corp. v. Puzon

Jr.
SECTION 17.Construction Where Instrument is Ambiguous. Where the language of the instrument is ambiguous or there are omissions therein, the following rules of construction
apply:
(a)Where the sum payable is expressed in words and also in figures and there is a discrepancy between the two, the sum denote d by the words is the sum payable; but if the words
are ambiguous or uncertain, reference may be had to the figures to fix the amount;
(b)Where the instrument provides for the payment of interest, without specifying the date from which interest is to run, the interest runs from the date of the instrument, and if the
instrument is undated, from the issue thereof;
(c)Where the instrument is not dated, it will be considered to be dated as of the time it was issued;
(d)Where there is a conflict between the written and printed provisions of the instrument, the written provisions prevail;
(e)Where the instrument is so ambiguous that there is doubt whether it is a bill or note, the holder may treat it as either a t his election;

(f)Where a signature is so placed upon the instrument that it is not clear in what capacity the person ma king the same intended to sign, he is to be deemed an indorser;
(g)Where an instrument containing the word "I promise to pay" is signed by two or more persons, they are deemed to be jointly and severally liable thereon.
People v. Romero
Estafa; 800%
Accused-appellant relies on the fact that there was a discrepancy between the amount in words and the amount in figures in the check that was
return; issued
dishonored. The amount in words was P1,000,200.00, while the amount in figures was P1,200,000.00. It is admitted that the corporation had in the
PDC; dishonored
bank P1,144,760.00 on September 28, 1989, and P1,124,307.14 on April 2, 1990. The check was presented for payment on October 5, 1989. The
due to
rule in the Negotiable Instruments Law is that when there is ambiguity in the amount in words and the amount in figures, it would be the amount in
insuffiency; BP
words that would prevail. However, this rule of interpretation finds no application in the case. The agreement was perfectly clear that at the end of
22
twenty one (21) days, the investment of P150,000.00 would become P1,200,000.00. Even if the trial court admitted the stipulat ion of facts, it would
not be favorable to accused-appellant.
PNB v. Concepcion Mining
Under Section 17 (g) of the Negotiable Instrument Law and Art. 1216 of the Civil Code, where the promissory note was executed jointly and
severally by two or more persons, the payee of the promissory note had the right to hold any one or any two of the signers of the promissory note
responsible for the payment of the amount of the note.
Republic Planters Bank v.
Under the Negotiable Instruments Law, persons who write their names on the face of promissory notes are makers and are liable as such. By
CA
signing the notes, the maker promises to pay to the order of the payee or any holder according to the tenor thereof. Based on the above provisions of
law, there is no denying that private respondent Fermin Canlas is one of the co-makers of the promissory notes. As such, he cannot escape liabilit y
arising therefrom.
Where an instrument containing the words "I promise to pay" is signed by two or more persons, they are deemed to be jointly a nd severally liable
thereon. An instrument which begins with "I", "We", or "Either of us" promise to pay, when signed by two or more persons, makes them solidarily
liable. The fact that the singular pronoun is used indicates that the promise is individual as to each other; meaning that each of the co-signers is
deemed to have made an independent singular promise to pay the notes in full.
In the case at bar, the solidary liability of private respondent Fermin Canlas is made clearer and certain, without reason for ambiguity, by the
presence of the phrase "Joint and several" as describing the unconditional promise to pay to the order of Republic Planters Bank. A joint and several
note is one in which the makers bind themselves both jointly and individually to the payee so that all may be sued together for its enforcement, or
the creditor may select one or more as the object of the suit. A joint and several obligation in common law corresponds to a civil law solidary
obligation; that is, one of several debtors bound in such wise that each is liable for the entire amount, and not merely for his proportionate share. By
making a joint and several promise to pay to the order of Republic Planters Bank, private respondent Fermin Canlas assumed the s olidary liability
of a debtor and the payee may choose to enforce the notes against him alone or jointly with Yamaguchi and Pinch Manufacturing Corporation as
solidary debtors.
As a general rule, officers or directors under the old corporate name bear no personal liability for acts done or contracts entered into by officers of
the corporation, if duly authorized. Inasmuch as such officers acted in their capacity as agent of the old corporation and the change of name meant
only the continuation of the old juridical entity, the corporation bearing the same name is still bound by the acts of its agents if authorized by the
Board. Under the Negotiable Instruments Law, the liability of a person signing as an agent is specifically provided for in Section 20 thereof. 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 a gent, or as filling a
representative character, without disclosing his principal, does not exempt him from personal liability.
This Court takes note that the respondent Court, relying on Reformina vs. Tomol, lowered the interest rate on the promissory notes from 16% to
12%. The ruling in the case of Reformina vs. Tomol relied upon by the appellate court in reduc ing the interest rate on the promissory notes from
16% to 12% per annum does not squarely apply to the instant petition. In the abovecited case, the rate of 12% was applied to forebearances of
money, goods or credit and court judgments thereon, only in the absence of any stipulation between the parties. In the case at bar however, it was
found by the trial court that the rate of interest is 9% per annum, which interest rate the plaintiff may at any time without notice, raise within the
limits allowed by law. And so, as of February 16, 1984, the plaintiff had fixed the interest at 16% per annum.
SECTION 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.

SECTION 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.
SECTION 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.
Astro Electronics Corp. v.
Phil. Export

Astro loan; prom notes signed by Ramos; paid by

guarantor upon default; Ramos disclaims liability
alleging that he merely signed the same in blank
and the phrases in his personal capacity and
in his official capacity were fraudulently
inserted without his knowledge.

In signing his name aside from being the President of Astro, Roxas became a co-maker of the promissory notes and
cannot escape any liability arising from it. He did not deny signing the notes twice and did not offer any explanation
why he did so. Roxas, as President of Astro, is reasonably, a businessman who is presumed to take ordinary care of
his concerns.
He signed twice: first, as president of Astro and second, in his personal capacity. In signing his name aside from
being the President of Astro, Roxas became a co-maker of the promissory notes and cannot escape any liability
arising from it. Under the Negotiable Instruments Law, persons who write their names on the face of promissory
notes are makers, promising that they will pay to the order of the payee or any holder according to its tenor. Thus,
even without the phrase personal capacity, Roxas will still be primarily liable as a joint and several debtor under
the notes considering that his intention to be liable as such is manifested by the fact that he affixed his signature on
each of the promissory notes twice which necessarily would imply that he is undertaking the obligation in two
different capacities, official and personal.
An instrument which begins with I, We, or Either of us promise to pay, when signed by two or more persons,
makes them solidarily liable. Also, the phrase joint and several binds the makers jointly and individually to the
payee so that all may be sued together for its enforcement, or the creditor may select one or more as the object of the
suit. Having signed under such terms, Roxas assumed the solidary liability of a debtor and Philtrust Bank may
choose to enforce the notes against him alone or jointly with Astro.

Francisco v. CA

Insular Drug v. PNB

Phil. Bank of Commerce v.

Aruego

Francisco forged the signature of Ong on the

checks to make it appear as if Ong had indorsed
said checks and that, after indorsing the checks
for a second time by signing her name at the
back of the checks, Francisco deposited said
checks in her savings account with IBAA.

Philguarantee, as guarantor, became the transferee of all the rights of Philtrust as against Roxas and Astro because
the guarantor who pays is subjugated by virtue thereof to all the rights which the creditor had against the debtor.
The Negotiable Instruments Law provides that where any person is under obligation to indorse in a representative
capacity, he may indorse in such terms as to negative personal liability. An agent, when so signing, should indicate
that he is merely signing in behalf of the principal and must disclose the name of his principal; otherwise he shall be
held personally liable. Even assuming that Francisco was authorized by HCCC to sign Ong's name, still, Francisco
did not indorse the instrument in accordance with law. Instead of signing Ong's name, Francisco should have signed
her own name and expressly indicated that she was signing as an agent of HCCC. Thus, the Certification cannot be
used by Francisco to validate her act of forgery.
Any person taking checks made payable to a corporation, which can act only by agents does so at his peril, and
must abide by the consequences if the agent who indorses the same is without authority.
When a bank accepts the indorsements on checks made out to a drug company of a salesman of the drug company
and the indorsements of the salesman's wife and clerk, and credits the checks to the personal account of the salesman
and his wife, permitting them to make withdrawals, the bank makes itself responsible to the drug company for the
amounts represented by the checks, unless it is pleaded and proved that after the money was withdrawn from the
bank, it passed to the drug company which thus suffered no loss.
Where an inspection of the drafts accepted by the defendant shows that nowhere has he disclosed that he was signing
as a representative of the Philippine Education Foundation Company, and he merely signed as follows: "JOSE
ARUEGO (Acceptor) (SGD) JOSE ARUEGO", he is personally liable for the drafts accepted by him and he may not
interpose as a defense that he signed the drafts merely as an agent of the Philippines Education Foundation Company
of which he is president.
the defendant signed as a drawee/acceptor. Under the Negotiable Instruments Law, a drawee is primarily liable.

Thus, if the defendant who is a lawyer, really intended to be secondarily liable only, he should not have signed as an
acceptor/drawee. In doing so, he became primarily and personally liable for the drafts.
Under the Negotiable Instruments Law, a bill of exchange is an unconditional order in writing addressed by one
person to another, signed by the person giving it, requiring the person to whom it is addressed to party on demand or
at a fixed or determinable future time a sum certain in money to order or to bearer. As long as a commercial paper
conforms with the definition of a bill of exchange, that paper is considered a bill of exchange. The nature of
acceptance is important only in determination of whether a commercial paper is a bill of exchange or not. Thus, in
the case at bar, defendant's contentions that the drafts signed by him were not really bills of exchange but mere
pieces of evidence of indebtedness because payments were made before acceptance, is not meritorious.
Remo v. CA
SECTION 21.Signature by Procuration; Effect of . A signature by "procuration" operates as notice that the agent has but a limited authority to sign, and the principal is bound only in
case the agent in so signing acted within the actual limits of his authority.
SECTION 22.Effect of Indorsement by Infant or Corporation. The indorsement or assignment of the instrument by a corporation or by an infant passes the property therein,
notwithstanding that from want of capacity the corporation or infant may incur no liability thereon.
SECTION 23.Forged Signature; Effect of . When a signature is forged or made without the authority of the person whose signature it purports to be, it is wholly inoperative, and no
right to retain the instrument, or to give a discharge therefor, or to enforce payment thereof against any party thereto, can be acquired through or under such signature, unless the party against
whom it is sought to enforce such right is precluded from setting up the forgery or want of authority.
Forged signature of the drawer
BPI v. Casa Montessori
Citibank v. Cabamongan
Ilusorio v. CA

MWSS v. CA
PNB v. National City of NY

Prominent businessman;
secretary

Petitioner further contends that under Section 23 of the Negotiable Instruments Law a forged check is inoperative, and that Manila
Bank had no authority to pay the forged checks. True, it is a rule that when a signature is forged or made without the authority of the
person whose signature it purports to be, the check is wholly inoperative. No right to retain the instrument, or to give a discharge
therefor, or to enforce payment thereof against any party, can be acquired through or under such signature. However, the rule does
provide for an exception, namely: "unless the party against whom it is sought to enforce such right is precluded from setting up the
forgery or want of authority." In the instant case, it is the exception that applies. In our view, petitioner is precluded from setting up
the forgery, assuming there is forgery, due to his own negligence in entrusting to his secretary his credit cards and checkbook
including the verification of his statements of account.
Where a check is accepted or certified by the bank on which it is drawn, the bank is estopped to deny the genuineness of the
drawer's signature and his capacity to issue the instrument.
If a drawee bank pays a forged check which was previously accepted or certified by the said bank it cannot recover from a holder
who did not participate in the forgery and did not have actual notice thereof.
In the case of the payment of a forged check, even without former acceptance, the drawee can not recover from a holder in due
course not chargeable with any act of negligence or disregard of duty.
To entitle the holder of a forged check to retain the money obtained thereon, there must be a showing that the duty to ascertain the
genuineness of the signature rested entirely upon the drawee, and that the constructive negligence of such drawee in failing to
detect the forgery was not affected by any disregard of duty on the part of the holder, or by failure of any precaution which , from
his implied assertion in presenting the check as a sufficient voucher, the drawee had the right to believe he had taken.
In the absence of actual fault on the part of the drawee, his constructive fault in not knowing the signature of the drawer a nd detecting
the forgery will not preclude his recovery from one who took the check under circumstances of suspicion and without proper
precaution, or whose conduct has been such as to mislead the drawee or induce him to pay the check without the usual scrutiny or
other precautions against mistake or fraud.
One who purchases a check or draft is bound to satisfy himself that the paper is genuine, and that by indorsing it or present ing it for

payment or putting it into circulation before presentation he impliedly asserts that he performed his duty.
Appellant in purchasing the papers in question from unknown persons without making any inquiry as to the identity and authority
of the said persons negotiating and indorsing them, acted negligently and contributed to the appellee's constructive negligence in
failing to detect the forgery.
PNB v. Quimpo

PNB v. CA

The prime duty of a bank is to ascertain the genuineness of the signature of the drawer or the depositor on the check being encashed. It
is expected to use reasonable business prudence in accepting and cashing a check presented to it.

NEGLIGENCE ON THE PART OF THE DRAWER TO ABSOLVE BANK FROM LIABILITY ON FORGED CHECK, ABSENT.
Private respondent trusted Ernesto Santos as a classmate and a friend. He brought him along in his car to the bank and he left his
personal belongings in the car. Santos however removed and stole a check from his check book without the knowledge and consent of
private respondent. No doubt private respondent cannot be considered negligent under the circumstances of the case.
The question whether or not the indorsements have been falsified is immaterial to the PNB's liability as a drawee, or to its right to
recover from the PCIB, for, as against the drawee, the indorsement of an intermediate bank does not guarantee the signature of the
drawer, since the forgery of the indorsement is not the cause of the loss.
With respect to the warranty on the back of the check, it should be noted that the PCIB thereby guaranteed "all prior indorsements",
not the authenticity of the signatures of the officers of the GSIS who signed on its behalf, because the GSIS is not an indorser of the
check, but its drawer. Said warranty is irrelevant, therefore, to the PNB's alleged right to recover from the PCIB. It could have been
availed of by a subsequent indorsee or a holder in due course subsequent to the PCIB, but, the PNB is neither. Indeed, upon payment
by the PNB, as drawee, the check ceased to be a negotiable instrument, and became a mere voucher or proof of payment.
The acceptance of a bill is the signification by the drawee of his assent to the order of the drawer, which in the case of checks, is the
payment on demand, of a given sum of money. Upon the other hand, actual payment of the amount of a check implies not only an
assent to said order of the drawer and a recognition of the drawee's obligation to pay the aforementioned sum, but, also, a c ompliance
with such obligation.

The PCIB did not cash the check upon its presentation by Augusto Lim; the latter had merely depos ited it in his current account with
the PCIB; on the same day, the PCIB sent it, through the Central Bank, to the PNB for clearing; the PNB did not return the check to
the PCIB the next day or at any other time; said failure to return the check to the PCIB induced, under the current banking practice,
that the PNB considered the check good and would honor it; in fact, the PNB honored the check and paid its amount to the PCIB; and
only then did the PCIB allow Augusto Lim to draw said amount from his aforement ioned current account. Thus, by not returning to
the check to the PCIB, by thereby indicating that the PNB had found nothing wrong with the check and would honor the same, an d by
actually paying its amount to the PCIB, the PNB induced the latter, not only to believe that the check was genuine and good in every
respect, but, also, to pay its amount to Augusto Lim. In other words, the PNB was the primary or proximate cause of the loss, and,
hence, may not recover from the PCIB.

Republic v. Equitable Bank

It is a well-settled maxim of law and equity that when one of two innocent persons must suffer by the wrongful act of a third person,
the loss must be borne by the one whose negligence was the proximate cause of the loss or who put it into the power of the th ird
person to perpetrate the wrong.
The "24-hour clearing house rule" of the Central Bank covers the Government Treasury because the Treasury is a member of the
Clearing Office and documentary evidence shows that the Treasury "has agreed to clear its clearable items through" the said office
"subject to the rules and regulations of the Central Bank, and, besides, the said rule applies not only to banks, but, also, to the
institutions and entities therein alluded to.
Where the Treasury had not only been negligent in clearing its own warrants, but had, also, thereby induced the two defendant banks

to pay the amounts thereof to their respective depositors, and where, moreover, the irregularity of said warrants was apparent on the
face thereof from the viewpoint of the Treasury, and said defendant banks had not been informed of said irregularity until after the
said warrants had been cleared and honored, it is held that the loss of the amounts represented by said warrants is mainly imputable to
acts and omissions of the Treasury, for which said banks should not and cannot be penalized.
San Carlos Milling v. BPI

It is an elementary principle of banking that "A bank is bound to know the signatures of its customers; and if it pays a forged
check, it must be considered as making the payment out of its own funds, and cannot ordinarily charge the amount so paid to the
account of the depositor whose name was forges." (7. C. J., 683.) There is no act of the plaintiff that led the Bank of the P hilippine
Islands astray. If it was in fact lulled into a false sense of security, it was by the effrontery of D, the messenger to whom it
entrusted the large sum of money in question.
The signatures of the checks in question being forged, under section 23 of the Negotiable Instruments Law they are not a charge
against plaintiff nor are the checks of any value to the defendant. The proximate cause of loss was due to the negligence of the
Bank of the Philippine Islands in honoring and cashing the two forged checks.
It is very clear that the relation of plaintiff with the Bank of the Philippine Islands in regard to the checks in question, was that of
depositor and banker, creditor and debtor. The contention of the bank that it was a gratuitous bailee is without merit, and a bsolutely
contrary to what the bank did. It did not take it up as a separate account but it transferred the credit to plaintiff's current account as
a depositor of the bank. Banks are not gratuitous bailees of the funds deposited with them by their customers.
As the money in question was in fact paid to the plaintiff corporation the China Banking Corporation was indebted neither to the
plaintiff nor to the Bank of the Philippine Islands and consequently was properly absolved from any responsibility.
Forged Indorsement

Associated Bank v. CA
Associated Bank v. CA
BDO Savings v. Equitable
BPI v. CA
Gempesaw v. CA
Great Eastern Life v. HSBC
Jai Alai v. BPI
Manila Lighter Trans v. CA
Republic v. Ebrada
Westmont Bank v. Ong
SECTION 124.Alteration of Instrument; Effect of . Where a negotiable instrument is materially altered without the assent of all parties liable thereon, it is avoided, except a s against a
party who has himself made, authorized, or assented to the alteration, and subsequent indorsers.
But when an instrument has been materially altered and is in the hands of a holder in due course, not a party to the alteration, he may enforce payment thereof according to its original
tenor.
SECTION 125.What Constitutes a Material Alteration. Any alteration which changes
(a)The date;
(b)The sum payable, either for principal or interest;
(c)The time or place of payment;
(d)The number or the relations of the parties;
(e)The medium or currency in which payment is to be made;

Or which adds a place of payment where no place of payment is specified, or any other change or addition which alters the effect of the instrument in any respect, is a material alteration.
Bank of America v. Phil
Racing Club
HSBC v. Peoples Bank
Montinola v. PNB
Metropolitan Bank and
Trust Company v. Cabilzo
PNB v. CA
Republic Bank v. CA
The International Corporate
Bank v. CA and PNB
SECTION 24.Presumption of Consideration. Every negotiable instrument is deemed prima facie to have been issued for a valuable consideration; and every person whose signature
appears thereon to have become a party thereto for value.

SECTION 25.Value, What Constitutes. Value is any consideration sufficient to support a simple contract. An antecedent or pre-existing debt constitutes value; and is deemed such
whether the instrument is payable on demand or at a future time.
SECTION 26.What Constitutes Holder for Value. Where value has at any time been given for the instrument, the holder is deemed a holder for value in respect to all parties who
became such prior to that time.
SECTION 27.When Lien on Instrument Constitutes Holder for Value. Where the holder has a lien on the instrument, arising either from contract or by implication of law, he is
deemed a holder for value to the extent of his lien.
SECTION 28.Effect of Want of Consideration. Absence or failure of consideration is 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.
SECTION 29.Liability of Accommodation Party. An accommodation party is one who has signed the instrument as maker, drawer, acceptor, or indorser, without receiving value therefor, and for the
purpose of lending his name to some other person. Such a person is liable on the instrument to a holder for value, notwithsta nding such holder at the time of taking the instrument knew him to be only
an accommodation party.