NEGOTIABLE INSTRUMENTS LAW Course Outline MZR Villanueva-Castro

PRELIMINARY CONSIDERATIONS
1. 2. 3. Governing laws Concept of negotiable instrument Classes of negotiable instrument a. promissor note b. bill of e!c"ange $unctions of negotiable instrument C"aracteristics of negotiable instrument a. negotiabilit b. accumulation of secon&ar contracts (egotiable instruments compare& wit" ot"er papers )&ocument of title* letter of cre&it* certificate of stoc+* pawn tic+et* postal mone or&er* treasur warrant, .egal ten&er c"aracter

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CASES: Phil. Educ. Co., Inc. v . So!i"no, #$ SCRA %&'( Ti)"*i", +!. v . CA, ,,# SCRA -.#( Phili//in0 Ai!lin0 v . CA, -&- SCRA %%'

1ORM AND INTERPRETATION O1 NEGOTIABLE INSTRUMENTS

1. Re/uisites of negotiabilit )0ec. 1* (1., a. must be in writing and signed by the maker or drawer b. must contain an unconditional promise or order to pay a sum certain in money )1, promise or or&er to pa must be uncon&itional )a, reference to transaction )0ec. 3* (1., )b, source or pa ment or account to be &ebite& )2, pa able in sum certain in mone )a, provisions w"ic" &o not affect certaint of sum pa able )ii, pa ment of interest )0ec. 2* (1., )iii, pa ment b installments )0ec. 2* (1., )iv, acceleration clause )0ec. 2* (1., )v, pa ment wit" e!c"ange )0ec. 2* (1., )vi, pa ment of attorne 2s fees )0ec. 2* (1.,

CASES: M02!o/oli2"n B"n3 4 T!u 2 Co5/"n6 v . CA, 10). -&, -$$-, -$7 SCRA -.$( C"l208 Phil . v . CA, ,-, SCRA 77& c. payable on demand or at a fixed or determinable future time )1, w"en pa able on &eman& )0ec. -* (1., )2, w"en pa able at &eterminable future time )0ec. #* (1., d. payable to order or bearer )1, w"en pa able to bearer )0ec. 3* (1., )a, rule w"en instrument is pa able to a fictitious person, )2, w"en pa able to or&er )a, to w"ose or&er t"e instrument ma be ma&e pa able )0ec. 4* (1., CASE: An9 T03 Li"n v . CA, &' Phil. #&#( PNB v . Rod!i9u0:, G.R. No. -';#,%, S0/205)0! ,., ,;;& e. omissions that do not affect negotiability (Sec.6 !"#$ f. additional pro%isions not affecting negotiability (Sec. & !"#$ )1, sale of collateral securities )2, confession of 5u&gment )3, waiver of benefit )#, option to re/uire somet"ing in lieu of pa ment CASE6 Phili//in0 N"2ion"l B"n3 v . M"nil" Oil R0<inin9 4 B6= P!oduc2 Co5/"n6, 7# Phil 77% 2. Rules to be followe& in interpreting negotiable instruments )0ec. 1-* (1.,

CASES: R0/u)lic Pl"n20! B"n3 v . CA, ,-. SCRA '#&( S/ . Ev"n90li 2" v . M0!c"2o! 1in"nc0 Co!/., 02 "l, Au9u 2 ,-, ,;;#( Il"no v . >on. E /"nol, G.R. No. -.-'%., -. D0c05)0! ,;;%

NEGOTIATION
1. 2. Mo&es of transfer Concept of negotiation )0ec. 37* (1.,8 &istinguis"e& from assignment

CASES: Rea& again6 S0 )!0?o v . CA, ,,, SCRA 7..( Con olid"20d Pl6@ood Inc. v . I1C L0" in9 -7$ SCRA 77& 3. #. 9a s of negotiation )in case of or&er or bearer instruments, Concept of &eliver

CASES: D0 l" Aic2o!i" v . >on. Bu!9o , ,7% SCRA #'7( D0v0lo/50n2 B"n3 o< Ri:"l v . Si5" W0i, ,-$ SCRA '#. %. 1n&orsement a. concept

b. "ow ma&e )0ec. 31 : 32* (1., c. +in&s6 )1, special an& blan+ )0ec. 3# : 3%* (1., )2, con&itional )0ec. 33* (1., )3, /ualifie& )0ec. 34* (1., )#, restrictive )0ec. 3' : 3-* (1., &. ot"er rules on in&orsement )1, in&orsement of an instrument pa able to bearer )0ec. #7* (1., )2, w"ere instrument is pa able to two or more persons )0ec. 21* (1., )3, instrument is &rawn or in&orse& to a person as cas"ier )0ec. #2* (1., )#, w"ere name of pa ee or in&orsee is misspelle& )0ec. #3* (1., )%, in&orsement in a representative capacit )0ec. ##* (1., )', presumption as to time of in&orsement )0ec. #%* (1., )-, place of in&orsement )0ec. #'* (1., )4, stri+ing out of in&orsement )0ec. #4* (1., )3, transfer of an or&er instrument wit"out in&orsement )0ec. #3* (1., CASES: M02!o/ol BB"colodC 1in"ncin9 v . S"5)o3 Mo2o! Co., 02 "l., -,; SCRA &.7C( G05/0 "@ v . CA, ,-& SCRA .,, '. (egotiation b a prior part )0ec. %7* (1.,

>OLDERS
1. General concept of a "ol&er 2. ;ol&er in &ue course )re/uisites, )0ec. %2* (1., a. instrument complete an& regular b. ta+en before over&ue )1, rule in case of installment instruments )2, rule in case of &eman& instruments )0ec. %3* (1., c. notice of infirmit or &efect )0ec. %' : %-* (1.8 see also 0ec. %#* (1., &. goo& fait" e. "ol&er for value 3. <resumption of &ue course "ol&ing )0ec. %3* (1., #. Rig"ts of "ol&ers in &ue course )0ec. %-* (1., %. 0"elter Rule )0ec. %4* (1., CASES: D0 Oc"5/o v . G"2ch"li"n, ;# SCRA %$.( Y"n9 v . CA, G.R. No. -#&;'7, Au9u 2 -%, ,;;#( M0 in" v . IAC, -7% SCRA 7$'

LIABILITY O1 PARTIES
1. <rimar an& secon&ar liabilit &istinguis"e& 2. .iabilit &istinguis"e& from warranties

3. .iabilit an&=or warranties of parties a. Ma+er )0ec. '7* (1., b. >rawer )0ec. 0ec. '1* (1., )1, relations"ip wit" &rawee )2, relations"ip wit" collecting ban+ c. ?cceptor )0ec. 12- : '2* (1., &. 1n&orsers )1, General in&orsers )0ec. ''* (1., )2, @ualifie& in&orser )0ec. '%* (1., )3, Or&er of liabilit e. <arties negotiating b mere &eliver )0ec. '%* (1., f. Ot"er cases6 )1, irregular in&orser )0ec. '#* (1., )2, in&orser of bearer instrument )0ec. '-* (1., )3, accommo&ation part )0ec. 23* (1., )#, agents signing in be"alf of t"e principal CASES: A 2!o El0c2!onic v . Ro8" , 02 "l., S0/205)0! ,#, ,;;#( G"!ci" v . Dioni io, D0c05)0! &, ,;;#( C!i olo9o=+o 0 v . CA, S0/2. -%, -$&$( S"d"6" v . S0vill", -$ SCRA $,7( T!"v0l=On v . CA, ,-; SCRA #%,( A9!o= Con9lo50!"20 Inc. v . CA, #7& SCRA #%;( Gon:"l0 v . RCBC, ,$ Nov05)0! ,;;.( An9 v . A oci"20d B"n3, ;% S0/205)0! ,;;'( 1"! E" 2 v . Gold P"l"c0 +0@0l!6, G.R. No. -.&,'7, Au9u 2 ,;, ,;;&( Gon:"l0 v. Phili//in0 Co550!ci"l 4 In20!n"2ion"l B"n3, 02 "l., G.R. No. -&;,%', 10)!u"!6 ,#, ,;--

DE1ENSES
1. 2. Real an& personal &efenses* &istinguis"e&. Real &efenses6 a. minorit an& ultra vires acts )0ec. 22* (1., b. non-&eliver of an incomplete instrument )0ec. 1%* (1., c. frau& in factum &. forger an& want of aut"orit )0ec. 23* (1., )1, forger of ma+er2s signature )2, of in&orser2s signature )3, of &rawer2s signature )#, forger of bearer instruments e. f. 3 3. material alteration )partial real &efense, )0ec. 12# : 12%* (1., e!tinctive prescription

<ersonal &efenses6 a. ante-&ating or post-&ating )0ec. 12* (1., b. insertion of wrong &ate )0ec. 13* (1., c. filling-up blan+s be on& aut"orit )0ec. 1#* (1., &. want of &eliver of a complete instrument )0ec. 1'* (1., e. absence or failure of consi&eration )0ec. 24* (1., f. simple frau&* &uress* intimi&ation* force or fear* illegalit of consi&eration* breac" of fait" )0ec. %%* %' : %-* (1.,

CASES: Phili//in0 N"2ion"l B"n3 v . CA, ,%. SCRA 7$-( A oci"20d B"n3 v . CA, +"nu"!6 #-, -$$.( +"i=Al"i v . BPI, .. SCRA ,$( R0/u)lic v . E)!"d", +ul6 #-, -$'%( G05/0 "@ v . CA, 10)!u"!6 $, -$$#( Phili//in0

Co550!ci"l In20!n"2ion"l B"n3 v . Cou!2 o< A//0"l , #%; SCRA 77.( MWSS v . CA, -7# SCRA ,;( Ilu o!io v . CA, #$# SCRA &$( S"5 un9 Con 2!uc2ion v . 1"! E" 2 B"n3, -% Au9u 2 ,;;7( M02!o)"n3 v . C")il:o, ;. D0c05)0! ,;;.( B"n3 o< A50!ic" v . Phili//in0 R"cin9 Clu), G.R. No. -%;,,&, +ul6 ,;, ,;;$( W0 25on2 B"n3, <o!50!l6 A oci"20d B"n3 no@ Uni20d Ov0! 0" B"n3 Phili//in0 v. M6!n" D0l" Ro "=R"5o , G.R. No. -.;,.;, Oc2o)0! ,7, ,;-,( M02!o)"n3 v . BA 1in"nc0 Co!/o!"2ion, G.R. No. -'$$%,, 7 D0c05)0! ,;;$

EN1ORCEMENT O1 LIABILITY
1. 2. <arties primaril liable an& parties secon&aril liable General steps in enforcing liabilit a. promissor notes )1, presentment for pa ment )0ec. -7* (1., )2, notice of &is"onor )0ec. 43* (1., b. bills of e!c"ange )1, presentment for acceptance )0ec. 1#3* (1., )a, "ow ma&e )0ec. 132-13% : 13-* (1., )b, time to accept )0ec. 13'* (1., )c, rule w"en incomplete bill is accepte& )0ec. 134* (1., )&, +in&s of acceptance )0ec. 133-1#2* (1., )2, if &is"onore& b non-acceptance6 )a, notice of &is"onor )0ec. 43* (1., )b, rule in case of foreign bills )0ee provisions on protest, )3, 1f accepte&6 )a, presentment for pa ment to acceptor )b, rule if &is"onore& upon presentment for pa ment )c, rule in case of foreign bill <resentment for pa ment a. Concept of presentment b. Re/uisites for sufficienc )0ec. -2* (1., )1, &ate of presentment )0ec. -1* (1., )a, rule in &etermining maturit &ate )0ec. 4%* (1., )b, rule in computing time )0ec. 4'* (1., )c, rule if pa able at a ban+ )0ec. -%* (1., )2, place of presentment )0ec. -3 (1., )a, rule if pa able at a special place )0ec. -7* (1., )3, presentment to t"e part primaril liable )a, "ow presentment ma&e )0ec. -#* (1., )b, rule in case part primaril liable is alrea& &ea& )0ec. -'* (1., )c, presentment to partners )0ec. --* (1., )&, presentment to 5oint &ebtors )0ec. -4* (1., c. &. #. 1nstances w"ere presentment is e!cuse& )0ec. -3 : 42* (1., 9"en &ela in presentment e!cuse& )0ec. 41* (1.,

3.

(otice of &is"onor a. w"en &is"onor of t"e instrument occurs6 )1, &is"onor b non-pa ment )0ec. 43* (1., )2, &is"onor b non-acceptance )0ec. 1#3* (1.,

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w"o s"oul& give notice )1, "ol&er )2, agent )3, part w"o ma be compelle& to pa form of notice )0ec. #3 : ##* (1., to w"om notice is given )1, part secon&aril liable or agent )0ec. 3-* (1., )2, notice w"ere part is &ea& )0ec. 34* (1., )3, notice to partners )0ec. 33* (1., )#, notice to persons 5ointl liable )0ec. 177* (1., )%, notice to ban+rupt )0ec. 171* (1., time an& place of notice )0ec. 173-174* (1., w"en notice is e!cuse& or unnecessar )0ec. 173-112* 11#11%* (1., w"en &ela in giving notice e!cuse& )0ec. 113* (1.,

f. g. ".

CASES: 1"! E" 2 R0"l26 Inv0 250n2, Inc. v . CA, -.. SCRA ,%.( Won9 v . CA, 10)!u"!6 ,, ,;;-( In20!n"2ion"l Co!/o!"20 B"n3 v . S/ . Gu0co, 10)!u"!6 -,, ,;;-( 1"! E" 2 R0"l26 v . CA, Oc2o)0! %, -$&&( S2"20 Inv0 250n2 >ou 0 v . CA, ,-' SCRA #,( A i" B"n3in9 Co!/o!"2ion v . +"vi0!, 77 Phil '''( N6co S"l0 Co!/o!"2ion v . BA 1in"nc0 Co!/o!"2ion, ,;; SCRA .#'( A!c0o, +!. v . P0o/l0 o< 2h0 Phili//in0 , G.R. No. -7,.7-, -' +ul6 ,;;.( Alli0d B"n3in9 v . CA, GG S/o!2 @0"!, -- +ul6 ,;;.

DISC>ARGE O1 INSTRUMENTS
1. 2. Concept of &isc"arge ;ow instrument is &isc"arge& )0ec. 113* (1., a. pa ment in &ue course )0ec. 44* (1., )1, b t"e principal &ebtor )0ec. 113 AaB, )2, b t"e accommo&ate& part )0ec. 113AbB, b. intentional cancellation )1, rule in case of unintentional cancellation )0ec. 123* (1., c. an act t"at &isc"arge simple contracts &. principal &ebtor becomes a "ol&er >isc"arge of persons secon&aril liable )0ec. 127* (1.,

3.

C>ECDS
1. 2. 3. #. C"ec+s &efine& )0ec. 14%* (1., >istinguis"e& from &raft Relations"ip between &rawer* &rawee an& pa ee Cin&s of c"ec+ a. cas"ier2s an& manager2s c"ec+ )0ee D0< Circulars 2%3* series of 2777 : 231* series of 2771, b. certifie& c"ec+ )0ec. 14--143* (1., c. crosse& c"ec+ )?rt. %#1* Co&e of Commerce, )1, effects of crossing a c"ec+ &. memoran&um an& traveller2s c"ec+ w"en re/uire& to be presente& for pa ment )0ec. 14%* (1., effect of &eat" of &rawer

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pertinent <"ilippine Clearing ;ouse Corporation rules

CASES: B"2""n Ci9"! v . CA, ,#; SCRA .7&( S20lco M"!302in9 Co!/o!"2ion v . CA, +un0 -', -$$,( S2"20 Inv0 250n2 >ou 0 v . CA, -'% SCRA #--( P"/" v . A.U. A"l0nci", ,&7 SCRA .7#( Aill"nu0v" v . Ni20, G.R. No. -7&,--, ,% +ul6 ,;;.( EEui2")l0 PCI v . On9, -% S0/205)0! ,;;.( S0cu!i26 B"n3 4 T!u 2 Co5/"n6 v . RCBC, G.R. No . -';$&7 4 -';$&', +"nu"!6 #;, ,;;$