Case 1

M makes a promissory note payable to the order of P. P indorses the note specially to A, A indorses
the note in blank and delivers the same to B. B specially indorses the note to C, C specially indorses the
note to D, D indorses the note in blank and delivers it to E, E specifically indorses the note to H, holder.
Whose indorsement may H strike out?

Answer: H may strikeout E’s special indorsement. Special indorsements are those that are not
necessary to the holder’s title as even without any subsequent indorsement and it is possible that
the title to the instrument have been acquired by mere delivery. This is also in accordance with
section 48 of the Law on Negotiable Instruments, which states, “The holder may at any time strike
out any indorsement which is not necessary to his title. The indorser whose indorsement is struck
out, and all indorsers subsequent to him, are thereby relieved from liability on the instrument.”

Case 2

M makes a note payable to P or bearer and delivers the note to P. P indorses the note to A. A keeps
the note in his drawer but it is stolen by F who negotiates the same to B by forging A’s signature, B
indorses the note to C, C indorses the note to H, a holder in due course. Who among the following can
set up the defense of forgery?

Answer: None of them can set up the defense of forgery. This is in accordance with Section 23 of the
Law on Negotiable Instruments which states that “Forged signature; effect of. - 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 signature, unless
the party against whom it is sought to enforce such right is precluded from setting up the forgery or
want of authority.”

Case 3

At a movie premier, Perfecto Palmares approached Sharon Morales, the star of the movie, and
requested an autograph from her. Sharon Morales willingly obliged and signed her name at the bottom
right portion of a white 8” x 11” stationery which Perfecto Palmares presented to her. Shortly after
reaching home, Perfecto Palmares printed above the signature of Sharon Morales through his
computer the following: “I promise to pay Perfecto Palmares or his order P50,000.00”. Thereafter,
Perfecto Palmares negotiated the paper to Arturo Alvarez, Arturo Alvarez to Bernardo Benitez, and
Bernardo Benitez to Henry Hilado, holder. Alvarez, Benitez and Hilado knew nothing about how the
apparent note came into being. (F Soriano)
Question: Will Sharon Morales be held liable for the note?

If Henry Hilado is a holder in due course, can he collect from Sharon Morales?

Answer:

a. No, Sharon Morales cannot be held liable for the note since she did not gave consent to the
contract. This is in accordance with Section 23 of the Law on Negotiable Instruments which
states that “Forged signature; effect of. - 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 signature, unless the party against whom it
is sought to enforce such right is precluded from setting up the forgery or want of authority.”
b. No, Henry Hilado cannot collect from Sharon Morales even if he is a holder in due course. This is
in accordance with section 58 of Law on Negotiable Instrument in which it indicates forgery as a
real or absolute defense even against a holder in due course.