1967 Bar Examination Questions

Bautista, Cecille Loie G.

No questions regarding the topic of Negotiable Instruments Law

 1994 Bar Examination Questions

Bautista, Cecille Loie G.

Topic: Checks; Crossed Check

Question: Po Press issued in favor of Jose a postdated crossed check, in payment of which Jose
promised to deliver. Jose sold and negotiated the check to Excel Inc. at a discount. Excel did not
ask Jose the purpose of crossing the check. Since Jose failed to deliver the newsprint, Po ordered
to the drawee bank to stop payment on the check. Efforts of Excel to collect from Po failed. Excel
wants to know from you as counsel: 1)What are the effects of crossing a check? 2)Whether as
second indorser and holder of the crossed check, is it a holder in due course? 3) Whether Po’s
defense of lack of consideration as against Jose is also available as against Excel?

Suggested Answer:

1. The effects of crossing a check are:

1) The check may not be encashed, but only deposited in the bank;
2) The check may only be negotiated once – to one who has an account with the bank; and
3) The act of crossing serves as a warning to the holder that the check has been issued for a
definite purpose so that he must inquire if he has received the check pursuant to that purpose.

2. No, Excel is not a holder in due course.

Under Art. 72 of the Negotiable Instruments Law, presentment for payment to be sufficient must be
made (a) by a holder, or by some person authorized to receive a payment on his behalf. As to who
the holder or authorized person will depend on the instructions stated on the face of the check.
In this case, the instrument involved is a crossed check and was issued in favor of Jose to be
deposited only. Excel is therefore obligated to inquire regarding the circumstances involving the
issuance of the check. Failure on his part, as in this case, will prevent him from becoming a holder
in due course.
Hence, Excel

3. Yes, Po’s defense of lack of consideration as against Jose if also available as against Excel.
Under the Negotiable Instruments Law, a holder not in due course is subject to personal defenses
which can be raised against the person who negotiated the instrument to the holder not in due
course.
In this case, since Excel is not a holder in due course, Excel is subject to the personal defense
which Po Press can set up against Jose.
Thus, the lack of consideration is also available as against Excel.
 1994 Bar Examination Questions

Bautista, Cecille Loie G.

Topic: Checks; Presentment

Question: Gemma drew a check on September 13, 1990. The holder presented the check to the
drawee bank only on March 5, 1994. The bank dishonored the check on the same date. After
dishonor by the drawee bank, the holder gave the formal notice of dishonor to Gemma through a
letter dated April 27, 1994. 1) What is meant by “unreasonable time” as applied to presentment? 2)
Is Gemma liable to the holder?

Suggested Answer:

1. The Supreme Court had taken cognizance that under current banking practice, “reasonable time”
is meant not more than 6 months from the date of issue. Beyond said period, it is “unreasonable
time” and the check becomes stale.

2. No, Gemma is not liable to the holder.

Under Article 72 of the Negotiable Instruments Law, presentment for payment, to be sufficient must
be made at a reasonable hour on a business day on a proper date.
In this case, the presentment of payment was made after an unreasonable length of time of more
than three (3) years thereby making the check was already stale at the time of presentment.
Hence, Gemma is not liable.