Legal Rules for Negotiable Instruments

NIL #TiffaNotes Finals Reviewer If and Then
Legal Basis IF THEN BUT except/unless notes
Section 1. Form of negotiable nonnegotiable it cannot be negotiated it can be transferred / stipulated

instruments: assigned
(a) It must be in writing and signed by
the maker or drawer;
(b) Must contain an unconditional
negotiable it can be negotiated it has to be a holder in if not holder in due
promise or order to pay a sum certain in
due course course, THEN he is an
money;
assignee or transferee
(c) Must be payable on demand, or at a
fixed or determinable future time;
(d) Must be payable to order or to
bearer; and instrument is a issued by the maker and received by the payee
(e) Where the instrument is addressed to promissory note (Sec 1) then the requirements must conform to Section 1. (a) to (d)
a drawee, he must be named or
a bill of exchange issued by the drawer received by the drawee and encashed
otherwise indicated therein with
(Section 1) by the payee
reasonable certainty.
then the requirements must conform to Section 1. (a) to (e)
the holder can instrument satisfies the

determine from the certainty as to sum
instrument itself the
amount he is entitled to
receive at maturity
(Section 2)
if the instrument the instrument is non- it has to be at the option of
contains a promise or negotiable the drawer/ maker OR
order to do any act in both drawer/maker and
addition to the payment payee
of money (Section 5)
the instrument contains it does not affect the renders the stipulation
a confession of negotiability of the void
judgement (PNB v. instrument
Manila Oil)
the instrument contains it is unconditional an order or promise to pay Except:
an unqualified order or out of a particular fund is (a) An indication of a particular fund out of which reimbursement is
promise to pay NOT unconditional 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.
(c) Additional terms appearing on an instrument
*The following do not make the promise or order conditional
a time is certain so that it constitutes a an instrument payable
the holder will know determinable future time upon a contingency is
when he may enforce NOT negotiable
the instrument (Section
4)
the instrument does or the negotiability is NOT
does not contain affected
notarization
the instrument does the instrument will be in cases when date is

NOT contain a date considered to be dated necessary (such as:
as of the time it was — said date is tied to
issued the date of issue,
“payable after of 30
days”
— to determine when
the interest is to run
— to determine whether
a party acted within a
reasonable time in
making presentment of
payment
— determining of
prescription of legal
action
date is not stated in thethe law will deem the
calendar nearest date of the
month the date intended
value was omitted it will not affect the it can be used as a against holders in due
negotiability of the defense against the payee course
instrument because (personal defense)
consideration is
presumed
the instrument omits the it will not affect the
word “value thereof” negotiability of the
instrument because
consideration is
presumed
place is omitted it does not affect the it is only a prima facie where presentment for payment should
negotiability of the which is rebuttable be made:
instrument 1. Presumption that instrument is made
when it is dated
2. Presumption that it is payable at the
place of residence of the maker
3. Presumption the payment should be
made at the maker’s or drawer’s place
of business or his home
(Section 73)
payment is not in legal it does not affect the
tender negotiability of the
instrument
the instrument is (a) it is expressly stated if it states a day and it does not have to
payable on demand to be payable on month without the year of expressly have the
demand, or at or on its maturity, it is not words “on demand” it
presentation, payable on demand and is can have words such as
(b) no time for payment not negotiable. “at sight”, “or
is expressed presentation”, “on call”,
(c) instrument is overdue “at the holder’s
convenience” or
“payable… after date”
Sec. 8. When payable to order. -The instrument is payable to an order instrument must if the payee not named
instrument is payable to order where it is order specify the person named is described with
drawn payable to the order of a either before or after the reasonable certainty.
specified person or to him or his order. It word order
may 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.
Where the instrument is payable to
order, the payee must be named or
otherwise indicated therein with
reasonable certainty.
Sec. 9. When payable to bearer. - The Instrument is payable to if the note is payable “to if the note is payable to
instrument is payable to bearer bearer the order of bearer” it is a dead person it is a
(a) When it is expressed to be so held payable to order bearer instrument.
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.
an order instrument instrument becomes cannot render the
signed by last or only payable to bearer instrument non-negotiable
indorser in blank
the instrument contains it does not affect the
a defect of language or negotiability of the
grammatical error instrument
the instrument is ante- it does not affect the if it is done for an illegal
dated or post-dated negotiability of the or fraudulent purpose
instrument then the instrument is
invalid
the instrument is the holder may insert insertion of a wrong date holders in due course
payable at a fixed period the true date will render the instrument
after date but is issued not claimable as to the
undated or after sight person who inserted the
but the acceptance is date (personal defense)
undated
Sec 14 the instrument are then the instruments are it must be filled up strictly if the instrument is the authority to complete is not an
obviously left blank (Sec incomplete until such in accordance with the containing blanks only authority to alter
14) blanks shall be filled up authority given and within because the written
with the person who has reasonable time (personal matter does not fully note: material particular is the particular
*incomplete but authority defense) occupy the entire paper proper to be inserted in a negotiable
delivered it precludes insertion of instrument to make it complete
additional words
the instrument are left real defense
blank but filled up by
someone without
authority
the instrument are left personal defense
blank but filled up by
someone who exceeded
his authority
instrument are filled up personal defense
but words are added
instrument are filled up real defense
but altered
sec 15 the instrument is it will not be a valid there is prima facie there is presence of
incomplete but not contract and thus a real presumption of delivery negligence on the part
delivered (sec 15) defense of the maker/drawer, it
will render him liable to
a holder in due course
sec 16 the instrument is it is considered if a complete instrument is if found in possession of
complete but incomplete and found in the possession of the immediate party or a
undelivered (Sec 16) revocable until its an immediate party or a remote party it can be
delivery (personal remote party other than a shown to have been
defense) holder in due course, there conditional or for a
is prima facie presumption special purpose only
of delivery subject to and not transferring
rebuttal property of the
instrument.
there is transfer of it is “delivery”

possession, actual or
constructive, from one
person to another with
intent to transfer title.
there is first delivery of it is “issue"
the instrument complete
in form, to a person who
takes it as holder
sec 17 instrument is ambiguous it doesn't affect the note read section 17
(Sec 17) negotiability of the
instrument
sec 19 a person collects the the instrument is there must be authority
instrument as agent (sec considered delivered
19)
a person collects the the instrument is not yet
instrument as collector delivered
sec 18 the instrument does not he is not liable on the (1) person signs in a
contain the signature of instrument trade or assumed name
the person (sec 18) (2) if signed by a duly
authorized agent
(3) forger is liable
(4) acceptor makes his
acceptance of a bill on a
separate paper
(5) person makes a
written promise to
accept a bill before it is
drawn
(6) accomodated party
sec 20 the person signs as he is not personally he must be duly requisites:
agent (sec 20) liable authorized (1) he is duly authorized
(2) he adds words to his signature
indicating that he signs as an agent
(3) he discloses his principal
sec 22 the indorsement or he incurs no liability (real minor can only rescind his if the minor is guilty of applies to corporation and other
assignment of the defense) indorsement before the actual fraud therefore he incapacitated persons
instrument was done by instrument is negotiated to can be held bound by
a minor a holder in due course his signature
sec 23. Forged signature; effect of. - order instrument but holder cannot claim after indorsement, if there is presence of forgery must be proven, it cannot be
When a signature is forged or made signature of drawer is from drawer (real indorsee can claim from negligence on the part presumed
without the authority of the person forged defense) indorser (because of of the drawer
whose signature it purports to be, it is warranties)
wholly inoperative, and no right to retain order instrument, holder cannot claim holder can claim from if there is presence of
the instrument, or to give a discharge signature of drawer is from drawer and forged subsequent indorsers and negligence on the part
therefor, or to enforce payment thereof valid but indorsement is indorser (real defense) forger of the parties
against any party thereto, can be forged
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.
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 bearer instrument but holder cannot claim after indorsement, if there is presence of
signature, unless the party against signature of drawer is from drawer (Real indorsee can claim from negligence on the part
whom it is sought to enforce such right forged negotiated by defense) indorser (because of of the drawer
is precluded from setting up the forgery indorsement warranties)
or want of authority. bearer instrument but holder can only claim not to all other previous negligence
signature of drawer is from the immediate indorsers
forged and negotiated transferer and forger
by mere delivery
bearer instrument holder can claim from not to whomever his negligence
signature of drawer is drawer and the party signature is forged
valid, but indorsement is who delivered it to
forged negotiated by holder and forger
indorsement
the signature is forged drawer bank is liable if the inorsement is forged in determining
and the instrument was and the instrument is proximate cause
encashed encased then collecting
bank is liable
Sec 24 Presumption of consideration the instrument does not the law presumes that he who claims otherwise, Consideration or cause is the
mention the the maker /drawer must must prove his allegation immediate, direct or essential reason
consideration have received the which inudces the party to enter into a
consideration and that contract.
the same was lawful
there is lack of payee cannot claim from other holders in due
consideration the instrument. course may demand
payment (personal
defense)
Sec. 25 Value P sells and delivers to M M cannot allege as Unless there is fraud, Valuable consideration need not be
a piano worth 18,000 defense that the value of mistake or undue adequate. it is sufficient if it is a valuable
and M issues a PN to P the piano is NOT inluence one.
for 20,000 there is a ADEQUATE for the
valuable consieration amount of the note.
which is the piano BECAUSE THE LAW
PRESUMES that M is
capable of managing his
affairs.
M owes 10,000 payable Here the consideration An antecedent or pre existing debt is a
today. M fails to pay in for the check is the pre- valuable consideration. the debt may be
cash. he issues a check existing debt of M that of a third person and the discharge
for that amount to P of such debt is a valuable consideration
who accepts the check. for a negotiable instrument.
Sec. 26 Holder for value holder for value is one the holder is deemed as A holder of a negotiable instrument is
who has given a such not only as regards presumed to be a holder for value.
valuable consideraton to the party to whom
for the instrument value has been given by
issued or negotiated to him but also in respect
him to all those who became
parties PRIOR TO THE
TIME when value was
given.
Sec. 27 the holder has a lien on he is deemed a holder If not holder in due course the maker
the instrument arising for value to the extent can set up the defense of absence of
either from contract or of the lien consideration.
by implication
one who has taken a has a lien on the
negotiable instrument as instrument.
collateral, security for a
debt
Amount of instrument is the pledgee is the holder he must deliver the surplus
more than the debt for value to the extent of to the pledgor.
his lien. he can collect
full value of the
instrument, and apply
the same to the
payment of the debt
Amount of instrument is the pledgee is holder for
less than or the same as value for the full amount
the debt secured by and may therefore,
such instrument recover all.
between the pledgor the pledgee can collect
and the party liable on on the instrument only
the instrument, there are to the extent of the
personal defenses amount of the debt.
the defenses of the the pledgee can recover
party liable on the nothing upon the
instrument is a real instrument
defense
Sec. 28 there is absence or lack void (personal defense) ABSENCE- total lack of any valid
of consideration consideration for the contract in
consequence of which the alleged
contract must fail.
there is failure of instrument is valid instrument is rescissible FAILURE OF CONSIDERATION - the
consideration (personal defense) failure or refusal of one of the parties to
do perform or comply with the
consideration agreed upon.
there is insufficient instrument is valid if vitiated consent then
consideration (personal defense) real defense
there is illegality of void (personal defense)

consideration
Sec. 29 Liability of the accomodation there is absence of not a defense at all. if accomodation party is ACCOMODATION NOTE OR BILL -
party consideration between a corporation then it is a where the accomodation party has put
the accommodation real defense his name, without consideration, for the
party and purpose of accomodating some other
accommodated party party to use it and is expected to pay it
there is an he has no right to the the accomodated party
accomodation party instrument fails to pay then the
accomodation party
becomes the holder
One who signed the he is an accomodation if there's a lack of delivery. Kinds of accomodation party:
instrument as maker, party and: the accommodation party 1. accomodation maker
drawer, acceptor or 1. he actually lend his will not be liable. 2. accomodation drawer
indorser without credit to the party to 3. accomodation acceptor
receiving value therefore whom the 4. accomodation indorser
and for the purpose of accomodation is made
lending his name to 2. he is classified
another party according to the
accomodated party's
status.
One whose favor a he is an accomodated the relation between the accomodated
person without receiving party and: and accommodatin party - principal
value therefor, signs an 1. impliedly agrees to debtor and a surety.
instrument for the take up the instrument
purpose of lending his at maturity
credit and enabling said 2. to indemnify the
party to raise money accomodation party
upon it against the
consequences of
nonpayment
the solidary he may seek subject to the conditions
accomodation maker contribution from the imposed by law
paid to the bank the other solidary
balance due accomodation makers in
the absence of a
contrary agreement
between them
Sec. 30 Negotiation the instrument is it is negotiated and Delivery should be voluntary
transfered from one trasferee becomes a
person to another in holder
such a manner to
constitute the transferee
the holder
payable to bearer it is negotiated by any person in possession of an

delivery instrument payable to bearer is always
the bearer thereof, although he may
have no legal right.
payable to order two steps are required
for its negotiation:
1) indorsement - by the
payee or present holder
2) delivery - to the next
holder
Delivery of order transfer operates as an assignee acquiring the the assignee acquires delivery is presumed from possession
instrument without ordinary assignee. instrument is subject to all the right to have the however may be rebutted to a holder
indorsement Transfer does not defenses available against indorsement of the NOT in due course
become holder of the assignor. assignor
instrument
the the first delivery is to he acquires title to the not by NEGOTIATION, but a negotioable instrument's legal life
the payee of the instrument. by ISSUE or ISSUANCE. does not begin until it issued by the
instrument maker or drawer to the FIRST HOLDER
the first delivery is made payee aquired title by NEGOTIATION - Operates to make the
to a person other than negotiation transferee of the negotiable instrument
the payee (such as an the holder thereof
agent of the maker)
the negotiation to the the payee acquired the the indorsement of the last
payee is delivered back title by negotiation holder is not necessary
to him by the last holder because the payee is
remitted his former rights
and all intervening parties
are discharged from
liability.
the drawee bank pays it does no make the
bank a holder and the
bank is neither the
payee nor indorsee
the instrument is parol evidence is not
unconditionally admissible to show
delivered as an parol condition attached
operative contract to the obligation of the
contract
Sec. 31 indorsement payee signed (indorsed) he becomes an indorser indorsement alone w/o INDORSEMENT - writing of the name of
the instrument and (becomes a party to the delivery conveys no title the payee on the instrument with intent
delivered it to another instrument and may be and creates no holder either to transfer the title to the same, or
person held liable for its to strengthen the security of the holder
payment) and the by assuming a contingent liability for its
person who receives the future payment or both.
indorsed instrument is
an indorsee.
the indorser signs the he certifies two things:

instrument 1. the identity of the
indorser (as being the
payee or true owner)
2. genuiness of his
signature
the indorser signed the instrument becomes the law does not require one of the most common methods of
without additional words payable to bearer and an exclusive form by creating a bearer paper is to make a
is called, "Blank may be negotiated by which an indorsement may check that already has imprinted "pay to
Indorsement". mere delivery, without be accomplished. but it the order of " "pay to the order of cash"
any need for futher must be "WRITTEN" or be or "pay to the order of bearer".
indorsement regardless in "WRITING" Print ,
of whether the rubber stamp, or
instrument is originally typewritten
payable to bearer or not.
the name of the it is called a special the use of the word the indorser may add words which
indorsee is specified indorsement "assign" does not make a prohibit or limit the further negotiation of
negotiation a mere the instrument.
assignment.
the indorsement is on a then the paper is called it doesnt matter if the
slip of paper physically "ALLONGE". instrument has room or
attached to the not
instrument so as to
become part of it
it is not clear in what he shall be deemed an while indorsement is usually written at
capacity a person indorsser. the back, it may be written on the face
intended to sign of the instrument. PLACE IS NOT
ESSENTIAL.
Sec 32 the instrument was it the renders the if part of the amount has
delivered or indorsed instrument non- already been paid, the
partially negotiable unpaid balance may be
indorsed as this is
expressly authorized by
law.
the indorsement it does not operate as a the negotiation is valid JOINT PAYEES - if an indorsement
purporting to transfer negotiation of the where the indorsees are purporting to transfer the instrument to
the instrument to two or instrument for the cause joint and the two or more persons severally
more persons severally of action is split and indorsement of all the
divided. indorsees are required
for a further negotiation
of the instrument.
ALTERNATIVE PAYEES the negotiation of the
instruments are instrument may be
sometimes payable to made by the
two or more alternative indorsement of either of
payees. the payees
sec 33 Kinds of indorsement the instrument as issued no indorsement, even 1.Special

satisfies all the restrictive one can 2. blank,
requirements of negate its negotiable 3. restrictive/nonrestrictive
negotiablity status 4. qualified/general
5. conditional/unconditional
Sec 35 Special indorsement the name of the payee is it is known as special special and blank indorsement are
specified indorsement or "unqualified indorsement".
indorsement in full.
two forms of special indorsement:
1) specifies the person to whom the
instrument is to be paid
2) specified the person to whose order
the instruments is to be payable
the instrument is the indorsement of the
originally payable to indorsee is necesssary
order and it is to the further negotiation
negotiated by the payee of the instrument.
by special indorsement
the instrument is it may nevertheless be Special indorser is liable
originally payable to further negotiated by only to such holders as
bearer mere delivery even if the make title through his
original indorsed it indorsement.
specially
Sec. 35 Blank indorsement an instrument with an may be converted into a bearer instrument always
indorsement in blank an order instrument remains a bearer
has a writing over the instrument negotiable by
signature of the indorser mere delivery whether the
in blank last indorsement is a blank
or a special one.
Sec. 36 indorsement restrictive LIMITING RIGHTS OF by such indorsement an restrictive indorsement - is one so
AN INDORSEE - an indorser can safeguard worded that it either restricts or
indorser notifies all his interests by limiting prohibits, entirely the further negotiation
prospective holders that the rights of the of an instrument, or modifies the rights
the indorsee has only indorsee whenever he of the holder or the liabilities of the
the authority to deal with should find it necessary indorser.
the instrument as to entrust the negotiable
thereby directed and paper to another.
that the indorsee has
only a restrictive title
thereto
endorsement is it destroys the The mere absence of in cases under (c) it only A restrictive indorsement either:
restrictive negotiability of the words implying power to gives notice that the a. Prohibits the further negotiation of the
instrument and all negotiate does not make paper cannot be instrument;
subsequent indorsees an indorsement restrictive. negotiated by the b. Constitutes the indorsee the agent of
acquire only the rights of indorsee for his own the indorser;
the first indorsee under benefit but the c. Vests the title in the indorsee in trust
the restrictive indorsement itself by the for or to the use of some other persons
indorsement. use of the word of
negotiability or order
may still be negotiated
Sec 37 effect of restrictive indorsement: there is a restrictive the indorsee may: all subsequent indorsees for the 3rd right the
rights of an indorsee indorsement 1. receive payment on acquire only the title of the indorsee cannot
the instrument first indorsee under the negotiate the instrument
2. sue thereon in his restrictive indorsement when it is prohibited in
name the indorsement
3. negotiate the
instrument
Sec. 38 qualified indorsement the qualified indorser it only constitues the still liable if the instrument such indorsement without recourse usually applies when
add words such as indorser a mere assignoris dishonored due to: specifically excludes person liable becomes insolvent
"without recourse" of the title of the 1. forgery warranties.
instrument. 2. lack of good title to the
instrument indorsed
3. lack of capacity to
contract of prior parties
4. knows that the
instrument was valueless
Sec. 39 conditional indorsement the indorser imposes such an indorsement the party liable to pay may if it is a condition on the conditional indorsement is binding only
some other condition to does not impair the make payment face of the instrument, it between the indorser or indorsee
his liability, or on the negotiable character disregarding the condition renders the instrument
indorsee's right to regardless if the without incurring liability non negotiable.
collect the proceeds of condition was fulfilled or but the person who
the instruments not of the instrument received the payment will
and only becomes a hold the proceeds subject
conditional indorsement to the right of the
conditional indorser
Sec. 40 indorsement of an instrument an instrument, payable it may nevertheless be the person indorsing this section only apply to instruments
payable to bearer to bearer, is indorsed further negotiated by specially is liable only to ORIGINALLY payable to bbearer.
specially delivery those holders who can
trace their title to the
instrument by a series of
unbroken indorsements
from such special
indorser. his liability is that
of general indorser
Sec. 41 INDORSEMENT WHERE an instrument is payable all must indorse and a 1. the one indorsing has
PAYABLE TO TWO or more persons to two or more payees missing indorsement authority to indorse for
or indorsees makes the instrument the others
similar to a forged 2. payees or indorsees
indorsement or are partners.
unauthorized 3. the payees are
indorsement (real stipulated with an "or"
defense)
Sec. 42 effect of instrument drawn or an instrument is drawn it is deemed a prima may be disproved to show
indorsed to a person as cahsier or indorsed to the order facie payable to the that the instrument really
of the cashier or other bank or corporation of belong to the cashier
fiscal officer which he is such an personally
officer
Sec 43 Indorsement where name is the name of the payee he may indorse the a person may correct a The holder paying or giving value for the
misspelled or indorsee is wrongly instrument as therein spelling error only if the instrument may require the payee or
designated or mispelled, described, adding, if he intention of the maker or indorsee to sign both names
thinks fit, his PROPER drawer was that the
SIGNATURE instrument should be
payable to the person
making the correction
Sec 44 Indorsement as representative the instrument is the authority of the
capacity indorsed personally or agent need not be in
through an agent. writing
Sec 45 Time of indorsement every negotiation is the one who alleges that where an instrument
deemed prima facie to the indorsement was bears date after the
have been effected effected after maturity has maturity of the
before the instrument the burden of proof. instrument
was overdue
Sec 46 Place of Indorsement every indorsement is presumption is rebuttable where the contrary
presumed prima facie to appears
have been made at the
place where the
instrument is dated.
Sec 47 continuation of negotiable An instrument is it continues to be when it has been
character negotiable in its origin negotiable resrtrictively indorsed or
discharged by payment
or otherwise
the negotiable it remains negotiable subject to defenses
instrument is already existing at the time of
overdue transfer
the negotiable it can still be negotiated
instrument was
dishonored
an instrument is non- it continues to be non- if it is indorsed to

negotiable negotiable "order" or "bearer" it
becomes as between
the indorser and
subsequent holders, a
negotiable instrument
Sec 48. Striking out indorsement the holder may at the indorsers whose if order instrument then
anytime strike out any indorsement has been the indorsement of the
indorsement which is struck out, and all payee cannot be striked
not necessary to his indorsers subsequent to out and will render the
title. him, are thereby relieved instrument non-
for liability on the negotiable
instrument.
Sec 49 Transfer without indorsement there is transfer without transferee is not a if the transferor had legal if the transfer is before indorsement, transferees do not
indorsement of an holder and cannot title, transferee has the gratuitous, the enjoy the presumption of ownership in
instrument for value negotiate it right to have the transferee has no right favor of holders
indorsement to compel the transferor
to make the
indorsement
Sec 50 when prior party may negotiate a holder negotiates an he may reissue and not entitled to enforce 1) it is payable to the
the instrument instrument and then negotiate it further. payment thereof against order of a third person,
subsequently reacquires any intervening party to and has been paid by
it before maturity whom he was personally the drawer
liable. 2) it was made or
accepted for
accommodation and
has been paid by the
party acommodated
3) where the instrument
is discharged when
acquired by a prior
party.
Sec 51 right of holder to sue payment a person who qualifies he is called ordinary In ascending order of rights:
as a holder but does not holder or mere holder 1) Holders simply
meet all the conditions (assignee or transferee). 2) Holders for value
to qualify as a holder in 3) holders in due course
due course
the instrument is in the he is subject to any it does not mean that an Rights of holdder in general:
hands of the holder not defense or defect on the instrument in the hands of 1) he may sue on the instrument in his
in due course instrument, whether it is such holder is non name
real or personal, as if it negotiable 2) he may receive payment and if the
were non negotiable payment is in due course the instrument
is discharged
the transfer vests in the the legal title or right subject to defenses
transferee such right as transfers to the
the transferor had and if transferee
the transferor had legal
title
Sec 52 what constitues a holder in due the holder is a holder in he takes the instrument if accomodation party, every holder is generally deemed prima
course. A holder in due course is a due course free from most defenses he is deemed holder in facie a holder in due course. he who
holder who has taken the instrument or adverse claims to it due course even with (d) claims otherwise has the burden of
under the following conditions: by other parties proof.
(a) That it is complete and regular upon holder is mere assignee assignee is subjected to he cannot acquire the holder for value - any consideration
its face; defenses, acquiring no status of a holder in due sufficient to support a simple contract
(b) That he became the holder of it better rights under the course regardless of other
before it was overdue, and without contract than those circumstances under
notice that it has been previously possessed by the which his acquisition of
dishonored, if such was the fact; assignor the instrument took place.
(c) That he took it in good faith and for a holder who is not a has all the rights of a the instrument is subject the absence of bad faith and knowledge
value; holder in due course general holder to every availabe is the essential basis that renders one a
(d) That at the time it was negotiated to defenses as if it were holder in due course.
him, he had no notice of any infirmity in not negotiable
the instrument or defect in the title of the a holder takes an he takes the instrument if the omission is not an
person negotiating it. incomplete instrument subject to all defenses important particular, it
without inquiry as to and equities. will not render him a
why it's incomplete holder not in due course
an instrument irregular is sufficient warning to examples of irregularity on its face:
on its face holder that he is not a 1. on or before... after date
holder in due course 2. payable on date BUT without the year
3. Instrument is blank as to payee,
acceptor or drawee
4. clear alterations
an instrument is overdue the instrument puts all one taking the instrument
persons on notice on the date of maturity
because it carries a takes before maturity
strong indication that it because the principal
has been dishonored debtor has the whole day
to pay
instrument is negotiated it can still be negotiated for indorsement holder is
after being overdue or either by indorsement or not a holder in due course
dishonored delivery while for delivery holder in
due course if without
notice
the instrument had both the transferee is not a a holder in due course for if there was notice of
installments which were holder in due course for installments overdue dishonor or nonpayment
overdue before the the instruments were payable in the future
transfer and payable in overdue
the future
the instrument is the date of maturity is presentment must be

payable on demand determined by the date made within a reasonable
of presentment time:
1. promissory note-after its
issue
2. bill of exchange-after
the last negotiation
the instrument is with a it is overdue at the
fixed maturity beginning of the day
designated by a after the fixed date
calendar date
the instrument is the date of maturity is
payable on the fixed by the happening
occurrence of a of the event and
specificied event which becomes overdue the
is certain to happen next day
an instrument is it is either: non-acceptance only
dishonored 1. through non- applies to bills of
acceptance exchange and non-
2. or non-payment payment can only take
place at the time of
maturity
the interest is not paid instrument is not
while principal is not due dishonored
the instrument was it is still considered an if the discount is love and affection does not constitute
purchased at a discount adequate consideration unusually large or value (cockrell v mckenna)
grossly unreasonable, it
raises suspicion of bad
faith
Cigar v. CA check is crossed 1. check may not be holder may recover from
encashed but only the party who
deposited indorsed/encashed the
2. check may be checks if the party has no
negotiated only ones valid excuse for refusing
3. serves as warning payment (real defense)
that the check has been
issued for a definite
purpose (so that he
must inquire otherwise
not a holder in due
course)
Sec. 53 person not deemed holder in due an instrument payable the holder is not reasonable time - nature of the
course on demand is deemed a holder in due instrument, the usage of trade and
negotiated on an course because it gives business, with respect to that
unreasonable length of rise to indicating the instrument and facts of a particular
time after its issue instrument has already case.
been dishonored
Sec 54 Notice before full amount paid the transferee receives he will be a deemed a
notice of any infirmity in holder in due course
the instrument or defect only to the EXTENT of
in the title of the person the amount paid by him
negotiating the same
before he had paid in full
no payment has been holder relieved form the if he pays, he is not if the holder has
made before notice of obligation to make entitled to the same incurred a liability to a
infirmity payment protection as holder in due third person thus he will
course. be a holder in due
an amount has been obligation to receive course for the whole
paid before notice of from the person liable instrument
infirmity ONLY to the extent of
amount he paid
Sec 55 title is defective the instrument or any the title is defective and fraud in facto or the title of the person who negotiates an
signature obtained personal defense (fraud execution is a real instrument is defective in two ways:
thereto are obtained by in inducement or in defense 1) in the acquisition ex: illegal
fraud, duress, or force obtaining consent) consideration
or fear, or other unlawful 2) in the negotiation ex: breach of
means, or for an illegal contract
consideration, or when
he negotiates it in
breach of faith, or other
circumstances
Sec 56 What constitutes notice of defect transferee has it destroys the status of negligence or qualified Notice to the agent is Doctrine of constructive notice is not
knowledge or a holder as a holder in indorsement does not deemed notice to the applicable
chargeable notice of any due course. Subject to constitute knolwedge prinicipal and notice to a
defect, at the time of all defenses. partner is notice to the
taking an instrument partnership
SEc. 57 Rights of holder in due course holder in due course he cannot be set up subject to real defenses. 1) he may sue on the instrument in his
against personal examples: own name
defenses. 1. incapacity to contract 2) he may receive payment and if the
examples: 2. illegality of contract payment is in due course, the
1. filling of wrong date (except where instrument is dischaged
2. sec 14 and 16 maker/drawer is party to 3) he holds the instrument free from any
3. absence or failure of the illegality) defect of title of prior parties
consideration 3. Sec 15 4) he holds the instrument free from
4. simple fraud or fraud 4. forgery defenses available to prior parties
in inducement 5. no authority among themselves; and
5. acquisition of 6. duress amounting to 5) he may enforce payment of the
instrument by duress, forgery instrument for the full amount thereof
force, fear and illegal 7. fraud in factum against all parties liable thereon
consideration 8. alteration
6. Breach of faith 9. prescription (10 years
7. innocent alteration or from due date)
spoliation 10. infirmities on the face
8. legal compensation, of the instrument
novation, condonation, 11. discharge at or after
offseting maturity
9. discharge before
maturity or of secondary
parties
Sec 58 subject to original defenses in the hands of any a negotiable instrument a holder who derives his if he is a party to any Shelter principle: a holder not in due
holder other than a is subject to same title through a holder in fraud or illlegality course acquires the right of a holder in
holder in due course defenses as if it were due course has all the affecting the instrument due course BUT does not become a
non negotiable rights of such former holder in due course
holder in respect of all
parties prior to the latter.
the original payee of a the paper again
note not a holder in due becomes subject to a
course repurchases the holder not in due course
instrument after
transferring it to a holder
in due course
Sec 59 Who is deemed a holder in due Every holder is deemed when it is shown that the if the holder claims the
course prima facie to be a title of any person who has instrument from the
holder in due course negotiated the instrument parties prior to the
was defective, the burden presence of infirmity or
is on the holder to prove defect then he is
that he or some person presumed a holder in
under whom he claims due course
acquired the title as holder
in due course.
Sec 60 Liability of maker. The maker of a primarily liable he is absolutely required he remains fully liable if prescription has run 1. maker of promissory note
negotiable instrument, by making it, and unconditionally despite the fact that the 2. acceptor of a bill of exchange
engages that he will pay it according to bound to pay upon its instrument is presented for 3. certifier of a check
its tenor, and admits the existence of the maturity late payment
payee and his then capacity to indorse.
secondarily liable conditionally bound: liable in the reverse order
1. due presentment for in which they signed the
payment or acceptance instrument
to primary party
2. dishonor by such
party
3. due notice of
dishonor to the drawer
or indorser
4. protest
the note has been lost the maker may require
or accidentally the holder to furnish a
destroyed, or cannot be bond to indemnify him
returned for any reason against liability
Sec. 61. Liability of drawer. The drawer drawer liability is conditional: if drawer limits his
by drawing the instrument admits the 1. bill is presented to liability
existence of the payee and his then drawee
capacity to indorse; and engages that, 2. dishonored by non-
on due presentment, the instrument will acceptance or non-
be accepted or paid, or both, according payment
to its tenor, and that if it be dishonored 3. notice of dishonor
and the necessary proceedings on 4. protest
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.
Sec. 62. Liability of acceptor. - The drawee not liable before if he refuses without
acceptor, by accepting the instrument, acceptance and not valid reason to accept
engages that he will pay it according to obligated to the payee the bill, he may be liable
the tenor of his acceptance and admits: or any holder to accept to the drawer for breach
(a) The existence of the drawer, the a bill of contract
genuineness of his signature, and his
capacity and authority to draw the
instrument; and
(b) The existence of the payee and his
then capacity to indorse.
drawee refuses to it triggers the liability of those indorsing
accept a bill secondary parties qualifiedly
drawee accepts becomes an acceptor upon acceptance, he cannot retract this

and primarily liable admission as against a holder for value
drawee bank accepts or it cannot refuse to pay the acceptance or
pays a check despite a the holder or recover payment was made
stop payment order what has been paid; prior to the receipt of
from the drawer, neither may it debit the the order
through oversight or drawer's account
otherwise
drawee accepts only by his not liable to pay the he accepts generally or nature of acceptance is importat only in
the tenor of his tenor of the instrument absolutely the determination of the kind of liabilities
acceptance of the parties involved, but not in the
determination of whether a commercial
paper is a bill of exchange or not
the bill is altered without two views:
authority by the payee 1. (FEBTC V Gold
before acceptance and Palace) drawee engages
is accepted to pay according to the
tenor of acceptance
2. drawee engages to
pay according to the
original tenor of the bill
WARRANTIES the acceptor warrants precluded from acceptor does not admit warrants:
the bill asserting as a defense the genuineness of the 1. existence of the payee and his then
incapacity or defect of indorser's signature capacity to endorse
the drawer or his 2. admits the existence of the drawer
signature against the and genuiniess of his signature and
holder capacity to draw
distinction between payment and acceptance by the drawee
Payment: Acceptance: check does not require acceptance
1. actual performance 1. promise to perform an act because they are payable on demand
2. discharge of indebtedness 2. only an obligation to pay
3. admission of his corresponding obligation to
pay the instrument
4. once there is payment there is acceptance
(FEBTC v Gold Palace)
Sec 63. When person deemed indorser a person places his he is deemed to be a he clearly indicates by parol evidence is inadmissible
signature upon an general indorser appropriate words his
instrument otherwise intention to be bound in
than as maker, drawer some other capacity
or acceptor
a person is a guaranty he binds himself as a liable subsidiarily after the a party is liable as a guarantor and not
guarantor and is not assets of the principal as indorser if his indorsement is made
discharged from liability debtor have been for identification only
merely because of lack exhausted
of due presentment or
notice of dishonor
a person is surety he is primarily and

absolutely liable with the
principal debtor without
benefit of excussion and
without necessity of due
presentment or notice of
dishonor
the guarantor signs an the signer engages that
instrument "payment if the instrument is not
guaranteed" or paid when due he will
equivalent words pay it according to its
tenor even if the party
entitled to payment has
not attempted to collect
form the party liable for
it
the guarantor signs an the signer engages that
instrument "collection if the instrument is not
guaranteed" or paid when due he will
equivalent words pay it according to its
tenor but only after the
party entitled to
payment has tried to
collect form the party
liable for it and has been
unable to do so
BDO v Equitable Banking Corp a bank stamps its bank is estopped from usually the collecting bank
guarantee the raising the non-
indorsements at the negotiability of the
back of the check and checks
subsequently presented
those checks for
clearing with another
bank
Sec. 64. Liability of irregular indorser. a person, not otherwise he is liable as an Sec 64 has no application to irregular
a party to an instrument, irregular indorser indorser after delivery to the payee
places thereon his
signature in blank before
delivery. His name
appears where would
naturally expect another
name.
the instrument is he is liable to the payee example:

payable to the order of a and to all subsequent Pay to P or order
third person parties. signed M
Pay to A
signed X
-> X is liable to P and A, not M
the instrument is he is liable to all parties example:
payable to the order of subsequent to the Pay to the order of M
the maker or drawer, or maker or drawer. signed M
is payable to bearer Pay to A
signed X
X is liable to A and subsequent
indorsers but not M
he signs for the he is liable to all parties example:
accommodation of the subsequent to the Pay to P or order
payee payee. signed M
Pay to A
signed P
signed X
X is liable to all parties subsequent to P
Sec. 65. Warranty where negotiation by qualified indorsement knowledge for (a) to (c) But when the negotiation if there is presence of The provisions of subdivision (c) of this
delivery and so forth. Every person is not important and he is by delivery only, the negligence section do not apply to a person
negotiating an instrument by delivery or is still liable to warranty extends in favor negotiating public or corporation
by a qualified indorsement warrants: subsequent parties who of no holder other than the securities other than bills and notes.
(a) That the instrument is genuine and in can trace their title to immediate transferee.
all respects what it purports to be; such indorser
(b) That he has a good title to it;
(c) That all prior parties had capacity to
contract;
(d) That he has no knowledge of any fact
which would impair the validity of the
instrument or render it valueless.
drawee is insolvent and holder cannot claim
instrument is negotiated from subsequent
by qualified indorsement indorsers or transferors
or delivery and can only claim from
the drawer
Sec. 66. Liability of general indorser. If a general indorser he engages that, on due warranties of a general
Every indorser who indorses without warrants presentment, it shall be indorser are based upon a
qualification, warrants to all subsequent accepted or paid, or transfer of title and are
holders in due course: both, as the case may available only to a holder
(a) The matters and things mentioned in be, according to its in due course
subdivisions (a), (b), and (c) of the next tenor, and that if it be
preceding section; and dishonored and the
(b) That the instrument is, at the time of necessary proceedings
his indorsement, valid and subsisting; on dishonor be duly
taken, he will pay the
amount to the holder, or
to any subsequent
indorser who may be
compelled to pay it.
the instrument indorsed the unqualified indorser
turns out to be invalid is liable to the holder
(because of lack of
consideration,
subsequent material
alteration)
Gonzales v RCBC a subsequent party he cannot have any
causes the defect in the recourse against any of
instrument the prior indorsers
no due presentment and holder cannot enforce he may nevertheless be
notice of dishonor given the promissory liability held liable because of
to indorser breach of his warranties
Sec. 67. Liability of indorser where paper person places his he incurs all the liability
negotiable by delivery. indorsement on an of an indorser and
instrument negotiable by governed by sec 65 or
delivery 66
Sec. 68. Order in which indorsers are As respect one another, as between or among The holder of an instrument which has
liable. indorsers are liable themselves, they have been dishonored is not bound by this
prima facie in the order agreed otherwise. section. As to him, indorsers are liable in
in which they indorse any order.
Joint payees or joint they are deemed to the one who pays may if the instrument none of them can escape liability just
indorsees have indorsed indorse jointly and demand reimbursement contains the words "we because proper notice of dishonor was
severally promise to pay" and not given to the other
made payable to the
order of the makers
themselves (solidary)
an indorsement states C has no right to
"I, or we hereby, indemnification by P, A
guarantee" signed in and B
succession by P, A, B, C
and D
Sec 69. Liability of an agent or broker. A broker or other agent he incurs all the unless he discloses the
negotiates an instrument liabilities prescribed by name of his principal
without indorsement Sec 65 and the fact that he is
acting only as agent
Sec 70. Presentment for Payment Person is primarily liable presentment for if not provided, then
payment is not presentment for payment
necessary is necessary in order to
charge the drawer and
indorsers
the instrument is, by its equivalent to a tender of he is not relieved from
terms, payable at a payment upon his part making payment
special place, and he is and will not be liable for
able and willing to pay it costs and interests
there at maturity, such accruing
ability and willingness
Presentment for presentment of an
payment instrument to the person
primary liable for the
purpose of demanding
and receiving payment
presentment is primary he remains liable on his risk assumed by holder is
liable and date for promise until it has been the insolvency of the
payment has passed fulfilled even without drawee
presentment or demand
was made
presentment for presentment for non-presentment will not
payment is required by payment is still not put him in default even if
terms of instrument necessary to charge the the instrument is overdue
maker or acceptor and unpaid
note is payable on suit may be maintained same rule as sec 70
demand even though no demand
has been made
Secs 61, 66 Person is secondary Presentment first to dishonor occurs when proper
liable primary party is required presentment is made and:
and then subsequent (1) payment or acceptance is refused; or
dishonor (2) cannot be secured
Sec 89 there is non-acceptance NOD must be given to
or non-payment drawer and each
indorser otherwise they
will be released from
liability
Sec 79, 80, 82, 151 Instrument is not the drawer and such presentment is
presented to the person indorsers and excused or dispensed
primarily liable discharged from with
secondary liability
Sec 71. Presentment where instruments the instrument is presentment must be otherwise, drawer and indorsers will be
is/is not payable on demand payable at a fixed or made on the day it falls discharged from liability
determinable future time due w/o grace period
presentment or notice is no effect
made before maturity`
Sec. 186 instrument is PN and presentment must be burden is on the holder of
payable on demand made within a a note to prove due and
reasonable time after its timely presentment
issue
instrument is BoE and presentment for last negotiation meaning last transfer for
payable on demand payment will be value
sufficient if made within
a reasonable time after
the last negotiation
thereof
70-118 check chart
Sec 119. Instrument; How discharged Instrument is discharged all parties are released the list is exclusive
(a) By payment in due course by or on whether primary or
behalf of the principal debtor; secondary from the
(b) By payment in due course by the obligation in the
party accommodated, where the instrument and the
instrument is made or accepted for his persons liable and can
accommodation; no longer be negotiated
(c) By the intentional cancellation thereof discharge is done by payment must be made by agreement between the discharges all liability
by the holder; payment or satisfaction in money and in parties, it may be made in
(d) By any other act which will discharge of the instrument by the accordance with sec 88 other forms
a simple contract for the payment of primary party
money; an instrument upon complete discharge
(e) When the principal debtor becomes which several are liable, results
the holder of the instrument at or after and satisified by him
maturity in his own right. who is primary liable
payment that violates a payment will not operate
restrictive indorsement as a discharge
payment made through holder is not bound to
check accept payment
between accomodation accomodated party is he may/may not appear in
party and accomodated the real debtor the instrument
party
valid cancellation to cancellation must: may be done by writing the word
effect a discharge (1) be intentionally done "cancelled" or "paid" on the face of the
(2) by the holder instrument or if instrument is torned up,
burned, mutilated or destroyed
instrument is cancelled presumption is if mutilation or destruction
through express writing cancellation is is by accident (or loss)
or otherwise intentional may be proved by parol or
secondary evidence
Art. 1231. Obligations will operate to discharge not in the hands of a

are extinguished: the instrument as holder in due course
(1) By payment or between the immedate
performance: parties
(2) By the loss of the
thing due:
(3) By the condonation
or remission of the debt;
(4) By the confusion or
merger of the rights of
creditor and debtor;
(5) By compensation;
(6) By novation.
other cause: annulment,

rescission, fulfillment of
a resolutory condition,
prescription
discharge under reacquisition must be: (2) must not be in a
subsection (e) (1) by the principal representative capacity
debtor
(2) in his own right
(3) at or after the date of
maturity
Sec 120. When persons secondarily instrument is discharged it ceases to have force but a dischrge of a applies only to parties secondarily or
liable on the instrument are discharged under Sec 119 and effect secondary party does not conditionally liable and NOT the ff:
(a) By any act which discharges the discharge the instrument (1) maker even though he be a surety for
instrument; itself a co-maker
(b) By the intentional cancellation of his (2) accomodation co-maker
signature by the holder; (3) accomodation acceptor
(c) By the discharge of a prior party; holder intentionally the effect is to discharge right of a holder to cancel no consideration is necessary to
(d) By a valid tender of payment made by strikes out the signature him from liability on the the signature of an support such discharge
a prior party; of a person secondary instrument as if he has indorser is subject to
(e) By a release of the principal debtor liable never been a party to limitation that indorsement
unless the holder's right of recourse the same is not necessary to the
against the party secondarily liable is holder's title
expressly reserved; subsection c means discharge to discharge by
(f) By any agreement binding upon the subsequent parties bankruptcy or by statute
holder to extend the time of payment or of limitations, or of a
to postpone the holder's right to enforce party for failure of the
the instrument unless made with the holder to give him NOD
assent of the party secondarily liable or or judgement
unless the right of recourse against such holder refuses a valid any subsequent parties does not operate to (subsection e) covers oral renunciation
party is expressly reserved. tender of payment are released discharge the debt but supported by a consideration
without any justifiable interest stops accruing in
reason to accept made favor of the party making
by a prior party tender
the instrument unless made with the
assent of the party secondarily liable or
unless the right of recourse against such
party is expressly reserved.
Principal debtor is all secondary parties are the holder reserved his no subsequent partes has a right of
released also discharged right of recourse against recourse against the principal debtor
the subsequent parties
because it would also
effect a reservation of
right of recourse by
secondary parties
(reservation must be
express only)
extension is granted to all secondary parties are mere failure on the part of no discharge if: must be between the holder and
the debtor by the discharged the holder to demand (1) with consent of principal debtor
creditor without consent payment does not of itself secondary party
of all subsequent parties constitute an extension (2) holder expressly
reserves his right of
recourse against the
secondary party
Sec 121. Right of party who discharges payment at or after it does not discharge it cancels his liability and
instrument. - Where the instrument is maturity is made by a the instrument subsequent parties
paid by a party secondarily liable party secondarily liable may again be negotiated (a) Where it is payable to
thereon, it is not discharged; but the the order of a third
party so paying it is remitted to his person and has been
former rights as regard all prior parties, paid by the drawer; and
and he may strike out his own and all (b) Where it was made
subsequent indorsements and again or accepted for
negotiate the instrument accommodation and
has been paid by the
party accommodated.
the reacquirer may strike
out his own and all
subsequent
indorsements not
necessary to the title
party so paying was may recover from prior
formerly a holder in due parties as such holder
course even though at that time
he already had notice of
defenses
Sec 122. Renunciation by holder holder expressly An absolute and a renunciation does not renunciation must be in renunciation describes the act of
renounce his rights unconditional affect the rights of a holder writing unless the surrendering a right or claim with or
against any party to the renunciation of his rights in due course without instrument is delivered without recompense
instrument against the principal notice up to the person
debtor made at or after primarily liable thereon -section 122 with 119 and 120 applies
the maturity of the only to renunciation by a unilateral act of
instrument discharges the holder (release without
the instrument consideration)
for renunciation to be (1) must be written does not apply to or

effective unless delivered prevent a discharge by
(2) absolute and oral novation under which
unconditional the obligation of the other
(3) made by holder persons is accepted in lieu
(4) at or after the of the maker of the
maturity instrument
renunciation is made in discharge only the the instrument itself
favor of a secondary secondary party and remains in force
party subsequent
renunciation is made runs the risk of being personal defense
before maturity of the negotiated later
instrument
Sec 123. A cancellation is made it is inoperative where an instrument or not limited to writing the word
unintentionally or under any signature thereon "cancelled" or "paid" or drawing of
a mistake or without the appears to have been crisscross clines but includes tearing,
authority of the holder cancelled, the burden of erasure, obliteration or burning
proof lies on the party who
alleges that the
cancellation was made
unintentionally or under a
mistake or without
authority.
Sec 124. Material Alteration NIL is materially altered it is avoided if in the hands of a holder as against a party who regardless if it favors or unfavors the
wihout the assent of all in due course, he may has himself made, party
parties liable enforce payment authorized, or assented
according to its original to the alteration and
tenor subsequent indorsers
who indorses the
alteration
alteration is apparent party claiming under the if not apparent; burden is
instrument has the on the party alleging it
burden to explain that
he had no part
drawee-bank pays a it has no right to claim
materially altered check reimbursement from the
drawer
alteration is made by a no effect if the original
stranger (spoliation) meaning can be
ascertained
an altered instrument is may enforce payment
negotiated to a holder in according to its orginal
due course tenor
Sec 125. What constitutes a material not under sec. 125 alteration is immaterial take note of the PCHC guidelines for
alteration: and will not discharge check
(a) The date; the instrument nor affect
(b) The sum payable, either for principal the liability of parties
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;
Sec 125. What constitutes a material
alteration:
(a) The date;
(b) The sum payable, either for principal
or interest; material alteration on (1) hastens or postpones the ff are not material:
(c) The time or place of payment; the date the time of payment (1) change in the date of
(d) The number or the relations of the (2) when interest is to indorsement unless the
parties; run issue is whether the
(e) The medium or currency in which indorsement was made
payment is to be made; before or after maturity
(f) Or which adds a place of payment (2) filling of date blanks
where no place of payment is specified, material alteration on all forms even addition the ff are not material:
or any other change or addition which sum payable to words "with interest" (1) alteration of the
alters the effect of the instrument in any marginal figures
respect, is a material alteration. (2) insertion by the payee
of the words "with
interest" after execution
with authority
(3) insertion of the legal
rate of interest if there is
already interest
material alteration of change in the maturity a change in the marginal
time of payment of the instrument notation of the date of
whether extended or maturity in order to correct
curtailed an obvious mistake is not
material
material alteration of change or inserts when change of the name of a
place of payment none is specified back at which an
instrument is payable
after execution is not
material if the original
bank does not exist
anymore and has
become another bank
other alterations (1) subsitution of the
words "or bearer or
order"
(2) writing the words
"protest waived" above
a blank indorsement
(3) erasure of the words
"without recourse"
(4) change in the
pronoun "I" to "we"
Sec 126. Bill of Exchange note is indorsed by the becomes just like a bill
payee
BoE is accepted becomes very similar to bill inclused drafts, orders and checks
a PN
BoE is payable on known as a draft
demand at sight
draft is drawn by a bank known as bank draft domestic draft-draft drawn and payable
against its branch or in one country
another bank international draft-drawn in one country
and payable in another
drawee bank solely liable for acts it has the burden of
done not in accordance proving that it did not
with the instructions of violate the instructions
the drawer-bank or given to it
purchaser of the draft
draft or BoE is drawn by known as trade if drawn against a bank seller is both the drawer and payee
the seller on the acceptance and has a instead of purchaser, it is
purchaser of goods and definite date or maturity called banker's
accepted by the latter acceptance
by signing it as drawee
Sec 127. drawee does not accept he is not liable
the bill
drawee accepts the bill he becomes an drawee is not bound to
acceptor, the principal accept even if the drawer
debtor has sufficient funds
drawee accepts the bill holder in due course of only against the drawer if drawee refuses to
a dishonored bill has no and indorsers, if any accept may be liable to
cause of action against drawer
the drawee either at law
or in equity
Sec 128. a bill may be addressed not to two or more
to two or more drawees drawees in the alternative
jointly or in succession
Sec 129. BoE is drawn in one known as foreign BoE
state or country and
payable in another state
or country
BoE is drawn and known as an inland BoE presumption is inland not
payable within the same foreign
state
Sec 130. the instrument is BoE holder may treat an in either case; holder need treating the bill as a note would make
and: instrument at his option not prove presentment for the drawer primary liable
(1) drawer and drawee either as a BoE or PN payment, have the
are the same person acceptance of the drawee,
(2) drawee is a fictitious or give notice of dishonor
person to charge the drawer
(3) drawee has no
capacity to contract
Sec 131. bill is dishonored by drawer of a bill and any referee is not bound to pay option of the holder
non-acceptance or non- indorser may insert the the holder but he may be -bill must first be protested
payment name of the person to made liable to the party
whom the holder may who named him
resort in case of need
(aka referee)
Sec 132. bill is accepted by he assents to the order must comply with the ff requisites need not be -secs 137 and 191
drawee of the drawer requisites: followed if constructive -applies only to BoE and not to PN
(1) in writing (not telephone acceptance under Sec (4) before delivery or notification,
yes telegram) 137 acceptor may revoke or cancel his
(2) signed by the drawee acceptance
(3) express promise to pay
money only
(4) bill must be delivered to
the holder
Sec 133. acceptance is made may be on the bill itself holder has the right to applicable to all BoE
or on a separate require that the
instrument acceptance be made on
the bill itself
Sec 134. drawee refuses to make holder has the option to
acceptance on the bill treat the bill as
itself dishonored and go
against the person
secondarily liable after
giving NOD
acceptance is made on does not bind the in favor of a person to
a separate instrument acceptor whom it is shown and
who, on the faith
thereof, receives the bill
for value
a "good" is written it constitutes an if in a collateral
acceptance if bill or document such as
check telegram
Sec 135. promise is made to it must be unconditional if further negotiation was desirable that the promise to accept
accept a future non- and in writing made and the indorsee describe the bill so that there can be no
exisiting bill neither saw nor knew of doubt of its application to it
the promise to accept, the
promissor will not be liable
to the indorsee
Sec 136. presentment to drawee drawee is allowed 24 hrs should he accept the
is made after presentment to acceptance is date from
decide w/n he will presentation or date when
accept he first saw the bill
Sec 137. Constructive Acceptance (1) drawee to whom a it is deemed accepted (1) accidental not the same as implied acceptance
bill is delivered for destruction is not -compare with sec 150 (delivered for
acceptance destroys the acceptance payment)
same; or
(2) Refuses within
twenty-four hours after
such delivery or within
such other period as the
holder may allow, to
return the bill accepted
or non-accepted to the
holder
Sec 138. Acceptance of incomplete bill bill was not yet signed acceptance may still be holder is not automatically
by drawer or otherwise made a holder in due course
incomplete, or when
overdue or after it has
been dishonored by a
previous refusal to
accept or by
nonpayment
bill is overdue or has bill may still be accepted
been dishonored after 24 hours or after
there has been a refusal
to accept or to pay
a bill payable after sight the holder, in the
is dishonored by non- absence of any different
acceptance and the agreement, is entitled to
drawee subsequently have the bill accepted
accepts it as of the date of the first
presentment.
Sec 139. Kinds of acceptance. - An "Accepted" or "good" holder has a right to require a general or
acceptance is either general or qualified. without anything more unqualified acceptance
A general acceptance assents without except the signature of
qualification to the order of the drawer. the acceptor
A qualified acceptance in express terms
general acceptance
varies the effect of the bill as drawn.
Sec 140. General Acceptance an acceptance to pay at it expressly states that
a particular place the bill is to be paid
there only and not
elsewhere
Sec 141. Qualified Acceptance:

(a) Conditional; that is to say, which
makes payment by the acceptor
dependent on the fulfillment of a
condition therein stated;
(b) Partial; that is to say, an acceptance
to pay part only of the amount for which
the bill is drawn;
(c) Local; that is to say, an acceptance to
pay only at a particular place;
(d) Qualified as to time;
(e) The acceptance of some, one or
more of the drawees but not of all.
Sec 142. a qualified acceptance holder may refuse it and he must notify the drawer
is made treat the bill as and indorsers of the
dishonored by non- dishonor
acceptance if he does
not obtain an unqualified
acceptance
holder agrees to a he must give notice to implied assent-if the drawer or indorser,
qualified acceptance the drawer and after receiving notice of a qualified
indorsers (they are not acceptance, does not express its
discharged from liability dissent within a reasonable time
if they expressly or
impliedly give their
consent)
Sec 143. Presentment for acceptance presentment for holder of the bill can presentment for acceptance not
must be made: acceptance is not directly present the necessary but for payment:
(a) Where the bill is payable after sight, necessary same for payment (1) bills payable on demand or on sight
or in any other case, where presentment bill is accepted it is the only time the (2) time bills
for acceptance is necessary in order to drawee becomes bound (3) bills payable at a day certain
fix the maturity of the instrument; or to pay (4) bills payable at a fixed time after its
(b) Where the bill expressly stipulates the drawee refuses to the bill will be deemed date
that it shall be presented for accept dishonored by non-
acceptance; or acceptance and the
(c) Where the bill is drawn payable holder then must
elsewhere than at the residence or place proceed in the same
of business of the drawee. manner as if the bill
In no other case is presentment for required acceptance
acceptance necessary in order to render
any party to the bill liable.
Sec 144. presentment for it must be presented for
acceptance is necessary acceptance or
(sec 143) negotiated within a
reasonable time
presentment or the drawer and all

negotiation was not indorsers are
done (sec 144) discharged
Sec 145-148 check chart
Sec 149. When dishonored by (a) pertains to secs 132, 133 and 142
nonacceptance: (b) pertains to sec 148 but must remain
(a) When it is duly presented for not accepted
acceptance and such an acceptance as
is prescribed by this Act is refused or
can not be obtained; or
(b) When presentment for acceptance is
excused and the bill is not accepted.
Sec 150. bill is duly presented for the person presenting it a holder in due course holder must:
acceptance and is not must treat the bill as does not take the bill as a (1) have the bill protested (sec 152)
accepted within the dishonored by dishonored bill (2) give notice of dishonor (sec 89) in
prescribed time (24 hrs) nonacceptance or he some cases
loses the right of
recourse against the
drawer and indorsers
Sec 151. a bill is dishonored by the holder, after giving if the bill is subsequently
non-acceptance NOD and protesting accepted, presentment for
when required, may payment is necessary
immediately proceed
against the drawer and
indorsers w/o waiting for
the date of maturity
Sec 152. protest is not done the drawer and when protest is not meaning of protest:
indorsers are necessary (1) formal instrument executed by a
discharged notary public or other competent person
certifying that the facts necessary to the
dishonor of the instrument by non-
acceptance/non-payment have taken
place
Sec 157. a bill has been protested may subsequently read sec 153 page 391 how protest is
for non-acceptance protested for non- made
payment
Sec 160. a bill is lost or destroyed protest may be made on
or is wrongly detained a copy or written
from the person entitled particulars thereof
to hold it
Sec 161. a bill of exchange has any person not being a Requisites of acceptance for honor:
been protested for party already liable (1) bill must have been protested for
dishonor by non- thereon may, with the dishonor by non-acceptance or for
acceptance or protested consent of the holder, better security
for better security and is intervene and accept (2) acceptor for honor must be a person
not overdue the bill supra protest for not a party already liable thereon, that
the honor of any party is, a stranger to the bill
liable thereon or for the (3) bill must not be overdue at the time
honor of the person for of the acceptance for honor
whose account the bill is (4) the acceptance for honor must be
drawn with the consent of the holder of the
instrument
someone desires to consideration is
protect the credit of presumened and the
another on the and bill presumption is that he
and he does so by has funds or money of
writing accepted the party for whose
honor he accepts
Sec 163. an acceptance for honor it is deemed to be an
does not expressly state acceptance for the
for whose honor it is honor of the drawer
made
Sec. 164. The acceptor for honor is liable there is an acceptor for he takes the place of the
to the holder and to all parties to the bill honor person for whose honor
subsequent to the party for whose honor he accepts, he is liable
he has accepted. to the holder and all
subsequent parties who
have right of recourse
against the person for
whose honor he accepts
Sec 165. there is an acceptor for his undertaking is not an only a collateral and the drawee pays basically he binds himself to pay
honor absolute engagement to conditional engagement to according to the terms of his
pay at all events pay acceptance, provided:
(1) duly presented for payment (even if
there's non acceptance) as opposed to
sec 151
(2) not paid by the drawer
(3) protested for non-payment
(4) nod is given to him supra protest
Sec 166. a bill payable after sight its maturity is calculated
is accepted for honor from the date of the
noting for non-
acceptance and not
from the date of the
acceptance for honor
Sec 167. a dishonored bill has it must be protested for

been accepted for honor non-payment before it is
supra protest or presented for payment
contains a referee in to the acceptor for
case of need honor or referee in case
of need
Sec 168. Presentment for payment to it is to be presented in it must be presented not
acceptor for honor, how made: the place where the later than the day
protest for non-payment following its maturity
was made
it is to be presented in it must be forwarded refer to secs 103 and 104
some other place than within the time specified
the place where it was in Sec 104
protested
Sec 169. there is delay in making the provisions of Section
presentment to the 81 apply
acceptor for honor or
referee in case of need
Sec 170. the bill is dishonored by it must be protested for as a result there would be three
the acceptor for honor non-payment by him protests:
(1) protest for dishonor by non-
acceptance or for better security
(2) protest for non-payment by the
drawee in order to hold the acceptor for
honor liable
(3) protest for non-payment by the
acceptor for honor in order to hold the
drawer and indorsers whose liabilities
have not yet become fixed because of
the acceptance for honor
Sec 171. a bill has been protested any person may prior protest for non- not applicable to PN payment for honor-payment made by a
for non-payment intervene and pay it payment is required person, whether a party to the bill or
supra protest for the not, after it has been protested for non-
honor of any person payment, for the benefit of any party
liable thereon or for the liable or for the benefit of the person for
honor of the person for whose account it was drawn
whose account it was
drawn
Secs 172-173 the requirements for the payment will operate requisites:
payment for honor are as a mere voluntary (1) bill has been dishonored by non-payment
not followed payment and the payer (2) has been protested for non-payment
acquires no right to full (3) payment supra protest is made by any person, even a party
reimbursement against (4) payment is attested by a notarial act of honor which must be
the party for whose appended to the protest or form an extension of it
honor he pays (5) notarial act must be based on the declaration made by the
payee for honor or his agent of his intention to pay the bill for
honor and for whose honor he pays
read p 407 for the steps

Sec 174. two or more persons the person whose
offer to pay a bill for the payment will discharge
honor of different parties most parties to the bill is
to be given the
preference
Sec 175. a bill has been paid for all parties subsequent to the payer for honor is
honor the party for whose subrogated for, and
honor it is paid are succeeds to, both the
discharged rights and duties of the
holder as regards the party
for whose honor he pays
and all parties liable to the
latter
Sec 176. the holder of a bill he loses his right of in payment for honor, the holder cannot
refuses to receive recourse against any refuse the payment unlike in acceptance
payment supra protest party who would have for honor where holder's consent is
been discharged by necessary
such payment
Sec 177. Right of payer for honor payer for honor pays to he is entitled to receive
the holder the amount of both the bill itself and
the bill and the notarial the protest
expenses incidental to
its dishonor
Sec 178. Bills in set a bill is drawn in a set, the whole of the parts usually availed of in cases where a bill
each part of the set constitutes one bill had to be sent to a distant place
being numbered and through some conveyance
containing a reference
to the other parts
Sec 179. two or more parts of a the holder whose title if the drawee in good faith
set are negotiated to first accrues is, as accepts or pays the part
different holders in due between such holders, first presented to him, he
course the true owner of the bill is protected and can
rightfully refuse to accept
or pay the bill presented
by holder in due course
Sec 180. the holder of a set he is liable on every

indorses two or more such part, and every
parts to different indorser subsequent to
persons him is liable on the part
he has himself indorsed,
as if such parts were
separate bills
Sec 181. the drawee accepts he is liable on every if all the parts are in the -acceptance may be written on any part
more than one part and such part as if it were a hands of the same and must be on one part only
such accepted parts separate bill holder -drawee is required to accept only one
negotiated to different part of a bill drawn in a set
holders in due course
Sec 182. the acceptor of a bill he is liable to the holder drawee warrants only the
drawn in a set pays it thereon part accepted by him
without requiring the
part bearing his
acceptance to be
delivered up to him, and
the part at maturity is
outstanding in the hands
of a holder in due
course
Sec 183. any one part of a bill the whole bill is only as far as the drawer is secs 180, 181, 182
drawn in a set is discharged concerned
discharged by payment
or otherwise
Sec 184. Promissory Notes Kinds:
(1) Certificate of deposit
(2) Bond
(3) Bank note
(4) Due Bill
(5) Mortgage Note
(6) Title-retaining note
(7) Collateral Note
(8) Judgment Note
(9) Installment Note
Sec 185. check provisions of BoE always drawn on a bank otherwise provided types of check:
applies and payable instantly on (1) memorandum check
demand (2) cashier's check
the check did not follow not required by law accepted in practice (3) manager's check
the form (4) traveler's check
an instrument is not not a check may be so styled on its (5) certified check
drawn on a bank face (6) crossed check
there is issuance of drawer in effect need not state that it is
check represents that there are payable on demand
funds in the bank for its
payment
check is delivered creditor may refuse under commercial usage, when a check has been
because it does not in substitute for cash cleared and credited to
itself constitute payment the account of the
of a debt creditor shall be
equivalent to a delivery
to the creditor
check is duly-stamped it gives rise to the
"paid" presumption that it was
already paid to the
intended payee
a person is acquitted of he may still be held
BP22 liable to play the debt he
owes
there is issuance of obligation is not
check extinguished and
remains suspended until
payment by the
commercial document is
actually realized
memorandum check drawer may be sued the
same as a maker upon a
promissory note
cashier's no presementment for mere issuance does not
check/manager's check/ acceptance or payment ipso facto work as an
certified check needed automatic transfer of funds
there must still be delivery
a check is crossed it imposes no legal 2 kinds:
obligation on the drawee (1) general "and Co."
not to honor such a (2) special
check
a check is crossed does not destroy its (a) the check may be (c) otherwise he is a holder not in due
negotiability negotiated only once (to course
one who has an account
with a bank)
(b) check may not be
encashed but only
deposited in the bank
(c) act of crossing serves
as warning to the holder
that the check has been
issued for a definite
purpos so that he must
inquire if he has received
the check pursuant to that
purpose
ang tek lian v ca check is payable to indorsement of drawer ex. pay to cash
bearer not necesary
check is payable to bank will not be liable bank is entitled to inquire if there is reasonable
bearer for negligence in failing on satisfactory proof of cause for suspecting an
to check the identity of identity irregularity
the holder
depositor fails to if the bank honors a collecting bank who will
perform his obligation to forged check due to be liable
fill up the checkbook such negligence,
depositor will be liable
Sec 186. check was not drawer will be only to the extent of the requisites for discharge:
presented within discharged from liability loss cause by the delay (1) check is not presented within a
reasonable time after its reasonable time after its issue
issue presumption is on drawer (2) drawer suffers loss
to prove the loss (3) loss suffered by the drawer is
attributable to the delay
check was presented drawer will be
within reasonable time discharged from all
after its issue but no liability
notice of dishonor
stale check bank has no obligation it's a certified check normally 6 mos
to pay the check without
consulting the depositor
check is not presented drawer has no liability to presentment for payment is still
at all the holder or payee necessary
after drawing the check drawer remains liable for inasmuch as he suffers no
and before its the full regardless on the loss attributable to the
presentment, drawer unreasonable delay delay
withdraws his funds
check was not indorser is wholly delay is excused or
presented within discharged dispensed
reasonable time after its
issue
BP 22 check is drawn by a person/s who actually elements of bp22:
corporation, company or signed the check in (1) making, drawing and issuance of any
entity behalf of such drawer check to apply on account or for value
are liable under bp 22 (2) knowledge at the of issue of
insufficienc
(3) subsequent dishonor
covers all kinds of checks, and not only
insufficient funds but account closed or
no account at all
first and third element second element is may still be proved for the presumption to arise:
are present presumed otherwise (1) check is presented within 90 days
(2) drawer or maker of the check
receives notice that such check has not
been paid by the drawee
(3) drawer or maker of the check fails to
pathe holder of the check the amount
due thereon, or to make arrangements
for its payment in 5 working days after
receiving written notice that such check
has not been paid by the drawee
no notice of non- presumption cannot NOD must be written and
payment arise proof of receipt must be
shown which must be
properly authenticated
not presented within 90 the presumption cannot may still be proven deceit is immaterial
days arise otherwise provided its
presented within 180 days
person is accused of sufficient information of no double jeopardy if convicted of
bp22 the dishonored check estafa also
must be given in court
check is issued valuable consideration is person who claims prescribes in 4yrs
presumed otherwise has the burden
of proving it
Sec 187. a check is certified by the certification is must be stamped "certified" on the face
the bank on which it is equivalent to an of the check, together with the name of
drawn acceptance the bank, the date, and the handwritten
signature or initials of the officer making
the certification
bank refuses to certify it is not the same as certification can be written on a different
dishonor, holder has no instrument or bank writing "good"
right to sue the drawer
as if payment had been
refused
bank writes "good" same as certification "ok" is not certification effects of certification:
even with initials of a (1) equivalent to acceptance, making the
cashier of bank or when bank primarily liable on the instrument
it's done orally or by (2) it discharges persons secondarily
telephone liable if procured by the holder
a check is certified by bank becomes liable those alterations made (3) it operates as an assignment of the
the bank on which it is under sec 62 to it after certification funds of the drawer in the hands of the
drawn drawee-bank
a check is post-dated bank would not be (4) payee or holder bcomes the
bound by certification depositor of the drawee-bank with righs
made before the date on and duties of one in such a situation
which the check is (5) bank becomes primary debtor and
payable cannot refuse to pay
(6) drawer may not issue a stop
payment order on the certified check
funds of the drawer in the hands of the
drawee-bank
(4) payee or holder bcomes the
depositor of the drawee-bank with righs
and duties of one in such a situation
(5) bank becomes primary debtor and
cannot refuse to pay
check is certified must be done by those may be delegated (6) drawer may not issue a stop
with authority payment order on the certified check
Sec 188. holder procures the the drawer and applies only to indeorsers indorsers subsequent to no risk of creditor of insolvency of
certification of the check indorsers are at the time of the the certification are not debtor
discharged certification released
certificaion is obtaned secondary parties are cashier and manager's check stand at
not by the holder by not discharged when it the same footing as certified check
others is obtained by the
drawer even at the
request of the payee or
even if drawer is also
the payee
Sec 189. check is accepted or the check will operate before acceptance or A bank may rightfuly refuse to pay
certified by the bank as an assignment to the certification, drawer may checks drawn against it, in any of the ff:
bank of the credit of the countermand payment (1) bank is insolvent
drawer and bank will be and will not be liable (2) drawer's deposit is insufficient or he
liable as holder has no account with the bank or said
drawer dies before check is revoked there may be implied account had been closed or garnished;
acceptance acceptance (3) drawer is insolvent and proper notice
bank refuses to honor holder cannot sue the drawer can sue the bank unless the check has is received by the bank
the check bank for damages for wrongful been accepted or (4) drawer dies and proper notice is
dishonor certified received by the bank
there is certification bank will be liable to (5) drawer has countermanded payment
procured by drawer, and drawer if he pays the (6) holder refuses to identify himself
stop payment check (7) bank has reason to believe that the
order/countermand check is a forgery
there is certification bank will not be liable (8) check is stale or postdated
procured by holder, and because drawer is
stop payment already discharged
order/countermand
bank pays deposits bank is liable and must
evidenced by certificate prove payment
of deposit without
production and
surrender
associated bank v ca checks were illegally payee can go directly to
encashed at the fault of the collecting bank even
the collecting bank if there was no evidence
of delivery of check to
payee
bank pays the amount bank will be liable
of the checks before
clearing them with the
drawee bank (before the
lapse of the standard
15-day period)
there is partial payment bank cannot require bank has no obligation to

check holder to make part payment
surrender
there is failure on the it is not considered as a
depositor to report an waiver that the account
error within the 10 day will be correct
WAREHOUSE RECEIPTS LAW WR-Warehouse Receipts, WM-Warehousman, WH-Warehouse
Sec 1 a receipt is not issued it is not a warehouse even if they are in the form if duly authorized officer warehouse (WH) is the building or place
by a warehouseman receipt (WR) of WR or agent may validly where goods are deposited and stored
(WM) issue a WR for profit
Sec 2. Form of receipts; essential terms. WR omits any of the it will not affect the will render the WM liable WR are contracts and must be treated in
— Warehouse receipts need not be in requirements validity or negotiability for damages to those good faith
any particular form but every such of the WR injured by his omission
receipt must embody within its written
or printed terms:
(a) The location of the warehouse where there is date of issue prima facie the date of otherwise agreed upon
the goods are stored, appearing in the WR perfection and storage
(b) The date of the issue of the receipt, charges begin to run
(c) The consecutive number of the from said date
receipt,
(d) A statement whether the goods person are names as to primace facie the
received will be delivered to the bearer, whom the goods are persons entitled lawfully
to a specified person or to a specified deliverable to the possession of the
person or his order, goods deposited\
the goods are delivered negationable WR
to order or to bearer
(e) The rate of storage charges, absent of express presumed that the
agreement stating the depositor shall pay the
consideration customary or
reasonable
compensation
(f) A description of the goods or of the mere fact that the goods it does not make WR
packages containing them, deposited are ineffective when the
(g) The signature of the warehouseman incorrectly described identity of the good is
which may be made by his authorized fully established by
agent, evidence
(h) If the receipt is issued for goods of omisstion to state the renders the WM Sec 53
which the warehouseman is owner, WM's ownership of the criminally liable
either solely or jointly or in common with goods in the receipt
others, the fact of such ownership, and issued by him
(i) A statement of the amount of
advances made and of liabilities incurred
Sec 3 WM inserts in the WR it must not be: must also not be contrary (b) examples: "for account and at the
any other terms and (a) Be contrary to the to law, moral, good risk of the depositor"
conditions provisions of this Act. customs, public order or
(b) In any wise impair his public policy
obligation to exercise
that degree of care in
the safe-keeping of the
goods entrusted to him
which is reasonably
careful man would
exercise in regard to
similar goods of his
own.
Sec 4 WR in which it is stated it is a non-negotiable must be marked "non-
that the goods received receipt negotiable"
will be delivered to the
depositor or to any other
specified person
Sec 7 failure to mark "non- the holder of the receipt person who found or stole
negotiable" who purchased it for it cannot raise such
value and good faith defense to WM
may treat it as
negotiable at his option
Sec 5 A receipt in which it is it is a negotiable receipt
stated that the goods
received will be
delivered to the bearer
or to the order of any
person named in such
receipt
a provision shall be such provision shall be
inserted in a negotiable void
receipt that it is non-
negotiable
Sec 6 more than one the word "duplicate" except the first one
negotiable receipt is shall be plainly placed issued
issued for the same upon the face of every
goods such receipt
a WM fails to indicate he shall be liable for all

duplicate damages caused by his
failure so to do to any
one who purchased the
subsequent receipt for
value supposing it to be
an original, even though
the purchase be after
the delivery of the goods
by the WM to the holder
of the original receipt
Sec 8 demand to deliver the WM is bound to deliver if there is some lawful principal obligation of the WM:
goods is accompanied the goods excuse specifically the (1) take care of the goods
with: ff: (2) delivery them to the holder of the
(a) An offer to satisfy the (a) Lien receipt or depositor
warehouseman's lien; (b) Refusal to sign
(b) An offer to surrender (c) Refuse to surrender
the receipt, if negotiable, receipt
with such indorsements (d) Acquired title to the
and goods
(c) A readiness and (e) Sale of goods to
willingness to sign an satisfy lien
acknowledgment that (f) Sale of goods for
they have been perishables
delivered, if requested (g) Interpleader
by the warehouseman. (h) Fortuitous event
(i) When informed by
someone with authority
to not deliver
demand is not made duty to deliver the if demand is evidently
goods will not arise useless
failure to offer to satisfy WM can refuse to offer is vain or useless
lien deliver
WM delivers the goods WM will be criminally subject to waiver as where
without obtaining liable he refuses to deliver on
possession of WR other grounds than its
non-production
WM resfuses or fails to the burden shall be
deliver the goods in upon WM to establish
compliance with a the existence of a lawful
demand by the holder or excuse
depositor
Sec. 9. A warehouseman is justified in lawfully entitled (a) person to whom a

delivering the goods, subject to the competent court has
provisions of the three following ordered the delivery of
sections, to one who is: the goods
(a) The person lawfully entitled to the (b) to an attaching
possession of the goods, or his agent; creditor
(c) purchaser in case of
sale in proper cases
(b) A person who is either himself oral authority to transfer sufficient evidence
entitled to delivery by the terms of a
non-negotiable receipt issued for the
goods, or who has written authority from
the person so entitled either indorsed
upon the receipt or written upon another
paper; or
(c) A person in possession of a WM misdelivers to a WM is liable
negotiable receipt by the terms of which mere possessor of a
the goods are deliverable to him or negotiable WR by the
order, or to bearer, or which has been terms of which the
indorsed to him or in blank by the goods covered by it are
person to whom delivery was promised deliverable to the order
by the terms of the receipt or by his of another, not indorsee
mediate or immediate indorser.
WM delivered the goods WM cant sue for the WM had been sued by
to one who acquired value of the goods the depositor or
custody through falsified consignee who are the
delivery permit real parties in interests
Sec 10 Where a WM delivers the WM shall be liable even though he delivered
the goods to one who is as for conversion to all the goods as authorized,
not in fact lawfully having a right of he shall be liable, if prior to
entitled to the property or possession such delivery he had
possession of them in the goods if he either:
delivered the goods (a) Been requested, by the
otherwise than as person lawfully entitled to
authorized by the goods, not to make
subdivisions (b) and (c) such delivery; or
of the preceding section (b) Had information that
the delivery about to be
made was to one not
lawfully entitled
Sec 11 a WM delivers goods he shall be liable to any as provided in Sec 36 applies only to negotiable WR; whether
and fails to take up and one who purchases for such purchaser acquired title to the
cancel the negotiable value in good faith such receipt before or after the delivery of the
receipt receipt, for failure to goods by the warehouseman
deliver the goods to him
Sec 12 where a WM delivers he shall be liable to any as provided in Sec 36 whether such purchaser acquired title to
part of the goods for one who purchases for the receipt before or after the delivery of
which he had issued a value in good faith such any portion of the goods by the
negotiable receipt and receipt, for failure to warehouseman.
fails either to take up deliver all the goods
and cancel such receipt specified in the receipt
or to place plainly upon
it a statement of what
goods or packages have
been delivered
Sec 13 alteration is immaterial, WM is liable on the
whether fraudulent or altered receipt
not, authorized or not according to its original
tenor
alteration is material but WM is liable according
authorized to the terms of the
altered receipt
material but innocently WM is liable according
made, unauthorized to its original tenor
alteration is material and WM liable to original if with notice of such but a bona fide holder acquires no right
fraudulently made tenor alteration or the actual to the goods under a negotaible receipt
altererer, WM's liability is which has been lost or stolen or to
limited only to delivery which the indorsement of the depositor
has been forged
Sec 14 a negotiable receipt has a court of competent shall not relieve the
been lost or destroyed jurisdiction may order warehouseman from
the delivery of the goods liability to a person to
upon: whom the negotiable
(1) satisfactory proof of receipt has been or shall
such loss or destruction be negotiated for value
and without notice of the
(2) upon the giving of a proceedings or of the
bond delivery of the goods
Sec 15 the receipt has the word he warrants: except for breach of the WM may not be compelled to deliver
duplicate (1) receipt is an accurate warranty, the duplicate the goods by virtue of the duplicate
copy of an original impsoes no other liability except if Sec 14 was followed
receipt properly issued
and
(2) such receipt is
uncanceled at the date
of the issue of the
duplicate
Sec 16 WM sets up title or right it shall not excuse the such title or right is based on estoppel
to possession of the WM from liability for derived:
goods in himself refusing to deliver the (1) directly or indirectly
goods from a transfer made by
the depositor at the time
of or subsequent to the
deposit for storage, or
(2) from the WM's lien
Sec 17 and 18 there are several WM must determine not excused from liability if the WM brings the
claimaints to the goods within a reasonable the in case he made a mistake complaint in
validity of the confiicting interpleader, WM will be
claims and deliver to the relieved from liability in
person whom he finds is delivering the goods to
entitled the person whom the
court finds to have a
better right
Sec 20 bona fide purchaser of WM is estopped, if the description
WR whether receipt is consists merely of
negotiable or not, to marks or labels upon the
deny the he has goods or upon the
received the goods pacakages containing
described n it them
Sec 21 there is failure to WM is liable for loss or for any loss or injury to
exercise such care as injury to the goods the goods which could
reasonably careful caused by such failure not have been avoided
owner of similar goods by the exercise of such
would exercise care ( except if
stipulated)
there was demand to any loss or damage due if there is a valid excuse
deliver upon issuance of to fortuitous event will to refuse delivery
receipt and failure of be born by the WM
WM to deliver
Sec 22-24 goods are deposited to WM cannot commingle if fungible goods of the warehouseman shall be severally liable
WM the goods same kind provided he to each depositor for the care and
is authorized by redelivery of his share of such mass
agreement or custom
Sec 25 goods are delivered to a they can not thereafter, unless the receipt be applies only to negotiable receipts
warehouseman by the while in the possession first surrendered to the
owner or by a person of the warehouseman, warehouseman or its
authorized be attached by negotiation enjoined
garnishment or
otherwise, or be levied
upon under an
execution
Sec 26 a creditor whose debtor he shall be entitled to what is attached is the negotiable
is the owner of a such aid from courts of receipt not the goods
negotiable receipt appropriate jurisdiction,
by injunction and
otherwise, in attaching
such receipt or in
satisfying the claim by
other means
Sec 27 and 30 the WM fails to stipulate holder of the receipt is even though non for all lawful charges for charges must be specified not the
the charges on the not liable to such negotiable storage and presevation amount
receipt charges as may be of the goods
advanced by the WM
Sec 28 WM has a lien he may enforce them goods belonging to
on: another and stored by a
(1) against the goods of stanger in fraud
the depositor who is
liable as debtor
(2) against goods of
other persons stored by
the depositor who is
liable as debtor with
authority to make a valid
pledge
Sec 29 (a) WM surrenders WM loses his lien where the property is lien may only be enforced for the same
possession thereof, or taken w/o the WM's bailments not on other bailments even if
(b) refuses to deliver the consent or by force or same owner
goods when a demand under a legal process
is made with which he is
bound to comply under
the provisions of this Act
Sec 32 WM has right to collect he is entitled to all only to the depositor as
remedies of creditor debtor
even though he lost his
lien
Sec 33-36 WM wishes to enforces he has the ff remedies: if sale cannot be made, applies even if negotiable receipt is
his lien (1) refuse to deliver until WM can dispose of the negotiated
satisfied property if necessary
(2) causing extrajudicial
sale and applying the
proceeds to the lien
(3) filing a civil action for
the unpaid charges
Sec 37 WR is issued to bearer receipt shall be may again be negotiated must acquire the WR in good faith and
but indorsed specially negotiated only by in blank for value
indorsement
must acquire the WR in good faith and
for value
Sec 41 a person to whom a he acquires the ff: negotiation takes effect

negotiable receipt has (1) title of the goods the only when indorsement is
been duly negotiated person negotiating had made
and the title of the
depositor
(2) direct obligation of
the WM on the receipt
Sec 42 a person to whom a he acquires the title of prior to notification of the
receipt has been the transferor WM of such transfer, title
transferred of the transferee is
defeated by the levy on
attachment or execution
by creditor of the
transferor or subsequent
pruchaser
Sec 44 a person who, for value, Warrants: if contrary intention this does not include mortgagees,
negotiates or transfers a(a) receipt is genuine, appears pledgees, or holder for security
receipt by indorsement (b) he has a legal right to
or delivery, or one who negotiate or transfer it,
assigns for value (c) he has knowledge of
no fact which would
impair the validity or
worth of the receipt, and
(d) he has a right to
transfer the title to the
goods and that the
goods are merchantable
or fit for a particular
purpose
Sec 48 purchaser, mortgagee it's an express
and pledgee fails to authorization for the
require the seller, seller, mortgagor or
mortgagor or pledger to pledger to negotiate the
negotiate the receipt receipt
Sec 49 a negotiable receipt has no seller's lien or right of whether such negotiation be prior or
been issued for goods stoppage in transitu subsequent to the notification to the
shall defeat the rights of WM who issued such receipt of the
any purchaser for value seller's claim to a lien or right of
in good faith stoppage in transitu
Nor shall the WM be the receipt is first
obliged to deliver or surrendered for
justified in delivering the cancellation
goods to an unpaid
seller
Sec 50-55 WM is criminally liable: (5) lost or destroyed, or

(1) issues or aids in issuing a receipt knowing that sale when necessary
the goods have not been received by the WM
(2) fraudulently issues or aids in issuing a receipt
for goods knowing that it contains false statement
(3) failure to place duplicate
(4) WM is owner but fails to state such
(5) failure to obtain possession of negotiable
receipts
Depositor is liable:
(6) person who issues a negotiable receipt for
goods which he has no title or subject to lien or
mortgage
LETTERS OF CREDIT LC
Art 568. The essentail conditions of it does not have any of it shall be considered as LC is not NIl because of absence of sec
letters of credit (LC) shall be: the 2nd circumstances mere letters of 1 (a and b)
1. To be issued in favor of a definite recommendation
person and not to order
2. To be limited to a fixed and specified
amount or to one or more undetermined
amounts, but within a maximum the
limits of which has to be stated exactly
Independence Principle bank is given a LC bank cannot be must follow rule on strict Fraud Principle: Transfield v LHC
submitting all the expected to look compliance (a) there is clear proof of
documents required beyond the documents fraud;
presented to it by the (b) the fraud constitutes
seller fraudulent abuse of the
the underlying contract bank must still pay upon independent purpose of
of the LC was not presentment of the LC the letter of credit and
fulfilled or there was a and documents without not only fraud under the
breach liability on himself main agreement; and
(c) irreparable injury
might follow if injunction
is not granted or the
recovery of damages
would be seriously
damaged.
Art 571 all documents bearer of the LC shall prompt payment is 3 days under the
necessary were pay the amount receiver UCP
submitted as stated in without delay
the LC
Art 572 Bearer of a LC does not LC shall be void in fact default rule on period:
make use within the and in law 1. within the philippines-6mos
period agreed upon with 2. outside-12 months
the drawer
GENERAL BONDED WAREHOUSE ACT bonded warehouseman-BW
Sec 3 person wants to engage he must first secure a he must file a bond or penalties if failure to comply
in the business of license from the director additional bond as may be
receiving commodity for of bureau of commerce required and insure the
storage commodity so received
there is a bonded his obligation are as follows:
warehouseman (BW) 1. secure the required license
2. filed the required bond
3. insure against fire
4. issue WR for said commodity
5. answer for damages
6. Not to discriminate bet person
7. keep a complete record
8. make reports
9. conduct his warehouse in complaince
10. not to receive a quantity of commodity greater than specified in his license
Phil Tobacco v Pablo WM already posted a owner is already amptly
performance bond as protected, and furthere
required by the owner, bond under the act is
and insured the goods prohibited
WM fails to follow the become ordinary receipt a surety cannot avoid
prescribed receipt under liability from the mere
WRlaw failure of the WM
TRUST RECEIPTS LAW

Prudential bank v IAC banker issues a trust bank takes full title to title is taken as security a banker advances money to an
receipt the goods at the very only therefore he cant intending importer and thereby lends
beginning until the deliver the possession of the aid of capital, of credit, or of
goods are sold and the goods business facilities and agencies abroad,
vendee pays to the enterprise of foreign commerce
Sec 10 the goods are lost property remains at the entruster is the bank
pending their disposition risk of the entrustee and
shall not extinguish his
obligation to the
entruster
Vintola v Insular Bank of Asia entrustee is unable to it does not affect the entrustee has two obligations to the
sell the goods right of the entruster to bank either:
recover the advances it (1) return the proceeds
had made under the (2) return the goods
loan covered by the LC
with the trust receipt as
security of the loan
PNB v Pineda the bank reposses the it cannot be considered payment can only be
goods pursuant to the as payment of the loan reulted after bank
trust receipt arrangment forecloses and applies
proceeds to the loan
obligation
both parties enter into it is not a trust receipt practically a loan

an agreement knowing transaction
that the return of the
goods is not possible
even w/ fault on any
party
debtor received the simple loan because
goods subject of the ownership of the goods
trust receipt before the was already transferred
receipt itself was to the debtor
entered into
subject goods were not then simple loan
being held for sale but
for construction
Sec 7 entruster sells the goods proceeds of such sale entrustee shall receive sale requirements:
upon default or failure of shall be applied: surplus while liable for 1. notice
entrustee to comply (1) to the payment of default 2. in writing
expenses 3. personally or through mail at the las
(2) payment of expenses known business address
of retaking, keeping and other remedies of entruster:
storing 1. cancel the receipt
(3) debt 2. civil action
Sec 9 Obligations of the entrustee:
(1) hold in trust for the entruster and shall dispose of them strictly in accordance with the terms and conditions of the trust receipt;
(2) receive the proceeds in trust for the entruster and turn over the same to the entruster to the extent of the amount owing to the entruster or as
appears on the trust receipt;
(3) insure the goods for their total value against loss from fire, theft, pilferage or other casualties;
(4) keep said goods or proceeds, separate and capable of identification as property of the entruster;
(5) return in the event of non-sale or upon demand of the entruster; and
(6) observe all other terms and conditions of the trust receipt not contrary to the provisions of this Decree.
Sec 11 & 12 there are written terms it shall be valid as innocent purchaser for what is being protected is entruster's
in the trust receipt against all creditors, value and in good faith security interest
entrustee, surety and
purchasers of the
entrustee for the
duration of the
agreement
Sec 13 entrustee fails to pay or liable for estafa double jeopardy if RPC if transaction is actually civil liability may still be enforced
turn over the proceeds estafa was charged a simple loan
of the sale or fails to against entruster also
return the goods
entrustee is a it is the officers,
corpoartion, partnership, employees or other
association or other persons responsible for
juridical entity the offense who is liable
to suffer imprisonment

Legal Rules for Negotiable Instruments

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Legal Rules for Negotiable Instruments

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NIL #TiffaNotes Finals Reviewer If and Then

Legal Basis IF THEN BUT except/unless notes

Section 1. Form of negotiable nonnegotiable it cannot be negotiated it can be transferred / stipulated

the holder can instrument satisfies the

Legal Basis IF THEN BUT except/unless notes

the instrument does the instrument will be in cases when date is

Legal Basis IF THEN BUT except/unless notes

Legal Basis IF THEN BUT except/unless notes

Legal Basis IF THEN BUT except/unless notes

there is transfer of it is “delivery”

Legal Basis IF THEN BUT except/unless notes

Legal Basis IF THEN BUT except/unless notes

there is illegality of void (personal defense)

Legal Basis IF THEN BUT except/unless notes

payable to bearer it is negotiated by any person in possession of an

Legal Basis IF THEN BUT except/unless notes

the indorser signs the he certifies two things:

Legal Basis IF THEN BUT except/unless notes

sec 33 Kinds of indorsement the instrument as issued no indorsement, even 1.Special

Legal Basis IF THEN BUT except/unless notes

Legal Basis IF THEN BUT except/unless notes

Legal Basis IF THEN BUT except/unless notes

an instrument is non- it continues to be non- if it is indorsed to

Legal Basis IF THEN BUT except/unless notes

Legal Basis IF THEN BUT except/unless notes

the instrument is the date of maturity is presentment must be

Legal Basis IF THEN BUT except/unless notes

Legal Basis IF THEN BUT except/unless notes

Legal Basis IF THEN BUT except/unless notes

Legal Basis IF THEN BUT except/unless notes

drawee accepts becomes an acceptor upon acceptance, he cannot retract this

Legal Basis IF THEN BUT except/unless notes

a person is surety he is primarily and

Legal Basis IF THEN BUT except/unless notes

the instrument is he is liable to the payee example:

Legal Basis IF THEN BUT except/unless notes

Legal Basis IF THEN BUT except/unless notes

Legal Basis IF THEN BUT except/unless notes

Legal Basis IF THEN BUT except/unless notes

Art. 1231. Obligations will operate to discharge not in the hands of a

other cause: annulment,

Legal Basis IF THEN BUT except/unless notes

Legal Basis IF THEN BUT except/unless notes

for renunciation to be (1) must be written does not apply to or

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Legal Basis IF THEN BUT except/unless notes

Legal Basis IF THEN BUT except/unless notes

Legal Basis IF THEN BUT except/unless notes

Sec 141. Qualified Acceptance:

Legal Basis IF THEN BUT except/unless notes

presentment or the drawer and all

Legal Basis IF THEN BUT except/unless notes

Legal Basis IF THEN BUT except/unless notes

Sec 167. a dishonored bill has it must be protested for

Legal Basis IF THEN BUT except/unless notes

read p 407 for the steps

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Sec 180. the holder of a set he is liable on every

Legal Basis IF THEN BUT except/unless notes

Legal Basis IF THEN BUT except/unless notes

Legal Basis IF THEN BUT except/unless notes

Legal Basis IF THEN BUT except/unless notes

there is partial payment bank cannot require bank has no obligation to