EXERCISE NO.

1
COMREV (Nego. Inst. Law)

Name: Joshua William D. Su Score: _____________

RETURN THIS QUESTIONNAIRE ALREADY FILLED-UP ON OR BEFORE
5:30PM ON NOV.29, 2017 AT THE COLLEGE OF LAW OFFICE.

1. On May 17, 2010, “M” issued a negotiable promissory note payable to the order
of “P”. On May 20, 2010, “A” threatened “P” to negotiate the note to him so “P”
made a special indorsement in his favor. “A” delivered the instrument to “B” the
following day. “B” was not at the time aware of the threats made on “P”. On May
23, 2010, “B” negotiated the note to “C” who also negotiated it on the same day to
“D”. On May 28, 2010, “D” negotiated the note to “B”. At that time, “B” already
knew what happened between “A” and “P”.
CAN “B” COLLECT FROM “M”? (5 pts.) Explain.

Yes, B can still collect from M. Although B is no longer a holder in due course,
because he knows of the defect of the instrument, the Negotiable Instrument Law
provides in Section 58 that in the hands of any holder other than a holder in due
course, a negotiable instrument is subject to the same defenses as if it were
non-negotiable. But a holder who derives his title through a holder in due course,
and who is not himself a party to any fraud or illegality affecting the instrument,
has all the rights of such former holder in respect of all parties prior to the latter.

Therefore, despite the knowledge of the fact of an irregularity between A and P,

M who was not threatened, who issued the instrument free from any illicit
influence, can be collected from.

2. On May 5, 2009, Melissa issued a negotiable promissory note payable to the

order of Peter payable 1 year after date in the amount of PhP 20,000.00 with 10%
per annum interest. However, there was no date of issuance on the note. Melissa
then negotiated the promissory note to Peter who placed the date of issuance
“April 20, 2008” instead of “May 5, 2009” so as to collect more interest. The same
note was negotiated to Harvey who knows the insertion of the wrong date.
CAN HARVEY COLLECT ANYTHING FROM MELISSA? (5 pts.) Explain.

Yes, Harvey can collect from Melissa but only to the extent of the original tenor of
the instrument.

Section 124 of the Negotiable Instrument Law provides that “when a negotiable
instrument is materially altered without the assent of all parties liable thereon, it
is avoided, except as against a party who has himself made, authorized, or
assented to the alteration and subsequent indorsers.”

Therefore, Harvey can collect from Melissa despite of his knowledge of the
alteration.
3. “A” issued a negotiable promissory note payable to “B” or order. “A” then
gave to “E” the promissory note for the purpose of safe-keeping. “E”, without
any authority and without the knowledge of “A”, delivered the note to “B” who
thought the same was upon the instruction of “A”. “B” then negotiated the note
to “C” who employed force on “B”. “C” thereafter delivered the same note to
“D”. CAN “D” COLLECT FROM “A”? Explain. (5 pts.)

No, D cannot collect from A. The fact that the instrument was not delivered nor
completed bars any liability on the part of A. The instrument was incomplete
because the Negotiable Instrument Law provides in section 16 that “Every
contract on a negotiable instrument is incomplete and revocable until delivery of
the instrument for the purpose of giving effect thereto.” The instrument was not
delivered because the same section further provides that “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;” Therefore the
instrument was not completed, and was not delivered.

Although D may be a holder in due course, he is barred from collecting from A

because Section 15 of the Negotiable Instrument Law Provides “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.”

Since the Negotiable Instrument Law bars any holder from collecting through an
incomplete and undelivered instrument, D cannot collect from A