Desa's Copy
COURSE OUTLINE
NEGOTIABLE INSTRUMENTS LAW
Recommended Textbook : Notes and Selected Cases on Negotiable
Instruments Law, Jose C. Campos, Jr. and Maria
Clara Lopez-Campos
Judge Gregorio L. Vega, Jr. (Ret.)
A. Introduction
- Origin, nature, concepts and function of negotiable instruments and
liabilities arising therefrom
B. Requisites of negotiability:
- Written form and signature
- Unconditional order or promise to pay
- Sum payable must be certain
- Sum must be payable in money
- Time of payment must be certain
- Sum must be payable to order or bearer
- Parties must be designated with certainty
1, Written form and signature (Secs. 18 and 19)
2. Unconditional order or promise to pay (Sec.3)
3. Sum payable must be certain (Sec.2)
4. Sum payable must be in money
5. Certainty of time of payment
a. Payable on demand (Sec.7)
b. Payable at a fixed time
c. Payable at a determinable future time (Secs.4.11.817)
d. Effect of acceleration provision
Case: RFC v. CA, E. Madrid and J. Andurza, 94 Phil. 984
(1954)
e. Provisions extending time of pyment
6.Must be payable to order or bearer
a. When payable to order (Sec.8
b. When payable to bearer (Sec.9)
Case: Ang Tek Lian v. CA, 87 Phil. 383 (1950)
7. Parties must be designated with certainty
a. Maker and drawer
b. Payee (Sec. 8)
c. Drawee (Sec. 128, 130)C. Provisions/Omissions not affecting negotiability (Secs. 5 and 6)
Case: PNB vs. Manila Oil Refining & By Products Inc., 43 Phil. 445
(1922)
D. Rules of Construction (Sec.17)
E, Transfer
1. Delivery and Issuance (Sec. 16)
2. Negotiation (Secs. 30 & 191)
a. Methods of negotiation
(i) By indorsement of payee or present holder
(ii) Delivery to transferee or indorsee
b. How indorsement made (Sec. 31, 32 & 43)
c. Kinds of indorsements (Sec. 33)
(i) Special and blank indorsements (Secs.34,35 & 40)
(i) Qualified indorsements (Sec.38)
(iii) | Conditional indorsement (Sec. 39)
(iv) Restrictive indorsement (Secs. 36 & 37)
(v) Indorsement to or by collecting bank
(vi) Negotiation by joint or alternative payees or indorsees
(Sec.41)
(vii) Unindorsed instruments (Sec.49)
(viii) Cancellation of indorsements (Sec. 48)
(ix) Indorsement by agent (Sec.44)
{x} Presumption as to indorsments (Secs.45,46 & 42)
(xi) Continuation of negotiable character (Sec.47)
F. Holder in due course (HDC) (Sec. 52)
1. Rights of holder in due course (Sec. 57 & 58)
Case : BPI v. Alfred Berwin & Co,
2. Holder for value
a. What constitutes value (Secs.24 &25)
b. Bank credit for value
c. What constitutes a holder for value (Sec.26)
d. Where holder has a lien on instrument (Sec.27)
e. Burden of proof ( Sec,24)
3. Holder in good faith (Secs.55 & 56)
a. Notice; bad faith; effect of suspicious circumstances
Case : Vicente de Ocampo & Co. v. Gatchalian, et.al., 3
SCRA 596
b. Financing company not a holder in good faith as to buyer
Case : State Investment House v. CA, 175 SCRA 310, 1989
c. Effects of purchase at a discountap
para
d. Effect of notice before full payment (Sec.54)
e. Constructive notice not sufficient
f. Notice of accommodation not notice of defect (Sec.29)
- Complete and regular (Sec. 124)
. Holder at or after maturity and without notice of dishonor
(Sec.58)
. Effect of postdating or antedating (Sec.12)
. Effect of qualified, conditional and restrictive indorsements
. Payee as holder in due course
. Rights of purchaser from a holder in due course (Sec.58)
10. Presumption in favor of due course holding (Sec.59)
Case : Asia Banking Corp., v. Tan Sin Guan, 44 Phil. 511
(1923)
11. Transfer of unindorsed instrument (Sec. 49)
G. Defenses and equities (Secs. 57, 58 & 55)
1.
2.
3.
Incapacity (Sec.22)
Illegality
Case : Rodriguez v. Martinez 5 Phil. 67 (1905)
Forgery (Secs. 23 & 18)
Case : PNB v. Hon. R. Quimpo, L-53194 March 14, 1988
a, Acceptance and payment under mistake (Sec,62)
Cases : Price v. Neal, 3 Burr. 1354 (1762) - “Price v. Neal
Doctrine”
PNB v. CA, 25 SCRA 693
b. Extensions of Price v. Neal Doctrine
(i) over draft
(ii) stop payment order
c. Effect of negligence of depositor
d. Effect of payment under forged instrument
Case : Banco de Oro v. Equitable Banking Corp.157 SCRA
188, 1988
e.Effect of negligence of drawee in informing recipient of
forgery
f. Effect of negligence of drawer in case of forged indorsements
on checks
. Material alterations (Secs. 124 & 125)
Case : Montinola v. PNB, 88 Phil. 178, 1951
a. Effect of negligence of drawer of checks
b. Effect of drawee’s payment or acceptance of altered check
Case : Republic Bank v. CA, GR No,42725, April 22, 1991