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Course Outline Negotiable Instruments I
Course Outline Negotiable Instruments I
NEGOTIABLE INSTRUMENTS
I. INTRODUCTION
General Principles
1. How negotiability is determined
Caltex (Philippines) vs. CA (212 SCRA 448, 10 August 1992)
a. Negotiation (Sec 10, NIL)
b. Assignment vs Negotiation; liability of Assignor (Art. 348, Code of
Commerce)
Casabuena vs. CA (286 SCRA 594)
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2. Effect of estoppel
Banco de Oro vs. Equitable Banking Corp. (157 SCRA 188, 1988)
Phil. Bank of Commerce vs Aruego (102 SCRA 530, 31 January 1981)
3. Requisites of Negotiability (Sec. 1, NIL)
a. It must be in writing and signed by the maker or drawer (Sec. 191, NIL)
b. It must contain an unconditional promise or order to pay a sum certain in
money
i. Promise or Order to Pay (Sec. 10, NIL)
ii. Promise or Order must be unconditional
iii. Resolutory vs Suspensive Conditions (Art. 1173, 1181, NCC)
iv. Period
v. When is promise unconditional (Sec. 3, 39, NIL)
vi. Sum certain in money (Sec. 2-5d, 6e, NIL; CB Circular 799, 1 July
2013; Art. 2209 NCC)
vii. Acceleration Clause
viii. Insecurity Clause
ix. Extension Clauses
Metropolitan Bank vs. CA (194 SCRA 169, 18 February 1991)
c. It must be payable on demand or at a fixed or determinable future time
Pay vs Palanca (57 SCRA 618)
d. It must be payable to order or bearer (Sec. 8, 9, NIL)
Ang Tek Lian vs CA (87 Phil 383, 25 Sept 1950)
e. The drawee must be named or indicated with reasonable certainty (Sec
1e, 130, NIL)
4. Omissions and provisions that do not affect negotiability
5. Interpretation of Instruments
6. Issuance / Delivery of negotiable instruments (Sec. 15, 16, 191, NIL)
Dela Victoria vs. Burgos (245 SCRA 374, 27 June 1995)
7. How are negotiable instruments and non-negotiable instruments transferred
Sesbreno vs. CA (222 SCRA, 24 May 1993)
Consolidated Plywood vs IFC Leasing (149 SCRA 448, 30 April 1987)
Traders Royal Bank vs. CA (269 SCRA 16, 3 May 1997)
8. How negotiation takes place (Sec, 16, 30, 40 NIL)
Manuel Lim vs CA (251 SCRA 409, 19 Dec 1995)
Dela Victoria vs Burgos (245 SCRA 374, 27 June 1995)
Development Bank of Rizal vs Sima Wei (217 SCRA 743, 9 March 1993)
9. Incomplete negotiation of Order Instrument (Sec. 49, NIL)
Negotiation
1. Where indorsement should be placed (Sec 31, NIL)
2. When person deemed an indorser (Sec 63, NIL)
3. Other Rules of Indorsement (Sec. 31, 32, 40-48, 49, NIL)
Enrique Montinola vs PNB (68 Phil 178, 26 Feb 1951)
Ang Tek Lian vs CA (GR L-2516, 25 Sept 1950)
4. Kinds of Indorsement (Sec. 33, NIL)
a. Blank and Special (Sec. 34, 35 NIL)
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i. Conversion of blank indorsement to special indorsement (Sec. 35,
NIL)
b. Qualified and General (Sec. 38, 65, NIL)
Metropol (Bacolod) Financing vs. Sambok Motors (120 SCRA 864, 28
February 1983)
c. Conditional (Sec. 39, NIL)
d. Restrictive (Sec. 36, 37, 47, NIL)
Gempesaw vs CA (218 SCRA 628, 9 February 1993)
e. Absolute
f. Joint (Sec. 41, NIL)
g. Irregular (Sec. 64, NIL)
5. When Indorsement is necessary (Sec. 30, 184, NIL)
6. Indorsement of entire instrument (Sec. 32, NIL)
7. Indorsement of bearer instrument (Sec. 40, NIL)
8. Indorsement when payable to two or more persons (Sec. 41, NIL)
9. Indorsement in representative capacity (Sec. 44, NIL)
10. Presumption on time and place of Indorsement (Sec. 45, 46, NIL)
11. Continuation of negotiable character (Sec. 47, NIL)
12. Negotiation by Prior Party (Sec. 50, NIL)
13. Striking Out of Indorsement (Sec. 48, NIL)
14. Effect of transfer without Indorsement (Sec. 49, NIL)
Consideration
1. Consideration for issuance and subsequent transfer (Sec. 24, NIL)
2. What constitutes Value (Sec. 25, NIL)
Bibiano Banas vs CA (325 SCRA 259, 10 February 2000)
3. Effect if Value previously given (Sec. 26, NIL)
4. Holder for value (Sec. 26, 27, NIL)
5. Effect of want of consideration (Sec. 28, NIL)
Holders
1. What is a holder (Sec 191, NIL)
a. Classes of Holder (Sec. 26, 27, 52 NIL)
b. Rights of Holders (Sec. 51, 88, 119, NIL)
Chan Wan vs Tan Kim (109 Phil 706, 30 Sept 1960)
Atrium Management vs CA (144 SCAD 390, 28 Feb 2001)
Marcelo Mesina vs CA (145 SCRA 497, 13 Nov 1986)
2. Holders in Due Course (Sec. 52, 53, 54, 55, 56, 88, NIL)
a. Instrument complete and regular
b. Taken before overdue (Sec. 4, 7, 53, 83, 85, NIL)
c. Previously dishonored (Sec. 83, 149, NIL)
d. Notice of infirmity or defect (Sec. 54, 55, 56, NIL)
e. Good faith
De Ocampo vs. Gatchalian (3 SCRA 596, 30 Nov 1961) Yang vs CA (GR
No. 138074, 15 Aug 2003)
Stelco Marketing vs CA (210 SCRA 51, 17 June 1992)
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f. Holder for Value (Sec. 24-27, NIL)
3. Presumption of Due Course Holding (Sec. 59, NIL)
4. Rights of Holders in Due Course (Sec. 14, 16, 57, NIL)
5. When subject to Original Defenses (Sec. 58, NIL)
Salas vs CA (181 SCRA 296)
State Investment House vs CA (175 SCRA 311, 13 July 1989)
Prudencio vs CA (143 SCRA 7, 14 July 1986)
Stelco Marketing vs CA (GR No. 96160, 17 June 1992)
6. Rights of Holders Not in Due Course (Sec. 14, 16, 51, 53, NIL)
7. Accommodation Parties (Sec. 29, NIL)
8. Shelter Rule (Sec. 58, NIL)
Charles Fossum vs Fernandez Hermanos (44 Phil 713)
Enforcement of Liability
A. Parties primarily and secondarily liable
B. Enforcement of primary liability (Sec. 60, 62, NIL)
C. Enforcement of secondary liability
a. Promissory Notes
i. Presentment for payment (Sec. 70, NIL)
ii. Notice of Dishonor (Sec. 89, NIL)
b. Bills of Exchange
i. Presentment for acceptance, when mandatory (Sec. 143, NIL)
ii. Dishonored by non-acceptance
a. Notice of Dishonor (Sec. 89, 115, 116 NIL)
b. Protest (Sec. 159 NIL)
iii. If accepted
a. Presentment for payment unless excused / not required
iv. If dishonored upon presentment for payment
a. Notice of Dishonor
b. Protest
v. Acceptor for Honor; Referee In Case of Need
a. Protest for Non-Payment (Sec. 165, NIL)
Protest
1. By whom made (Sec. 154 NIL)
2. When required (sec. 152, 161, 167, 170 NIL)
3. When Protest need not be made (Sec. 118 NIL)
4. Protest for non-acceptance, non-payment (Sec. 157 NIL)
5. How made (Sec. 153 NIL)
6. When to be made (Sec. 155 NIL)
7. Protest for better security (Sec. 158 NIL)
8. Where made (Sec. 156 NIL)
9. When Protest dispensed with (Sec. 159 NIL)
10. Protest where Bill lost (Sec. 160 NIL)
A. Concept
B. How Instrument Discharged (Sec. 119, 120 NIL)
1. Payment in Due Course (Sec. 88 NIL)
a. By the principal debtor (Sec. 119a, NIL)
b. By the accommodated party (Sec. 119b NIL)
c. Payment by person secondarily liable (Sec. 121 NIL); right of party who
discharges instrument
d. To whom must payment be made
2. Renunciation by Holder (Sec. 22 NIL)
3. Intentional Cancellation
a. Rule in case of unintentional cancellation (Sec. 123 NIL)
4. Any act that discharges simple contracts (Art. 1231 NCC)
5. Principal debtor becomes holder
V. CHECKS