NEGOTIABLE INSTRUMENTS LAW (ACT 2031) – NEGINS230
BACHELOR OF SCIENCE IN ACCOUNTANCY – II
2ND YEAR – 1ST SEM PHASE 3
Chapter 6 – PRESENTATION FOR PAYMENT
Section 70: Effect of want of demand on principal
debtor
Presentment for payment is not necessary in
order to charge the person primary liable on the
instrument; but if the instrument is, by its terms,
payable at a special place, and he is able and willing to
pay it there at maturity, such ability and willingness
are equivalent to a tender of payment upon his part.
But except as herein otherwise provided, presentment
for payment is necessary in order to charge the drawer
and indorsers.
Presentment - production of a bill of exchange to the
drawee for his acceptance, or to the drawee or acceptor
for payment or the production of a promissory note to
the party liable for payment of the same.
Presentment consists of :
1. personal demand for payment at the proper
place
2. with the bill or note in readiness to exhibit it if
required, and to receive payment and surrender
it if the debtor is willing to pay.
“A mere informal task asking payment of a note, not
accompanied with a presentment of it or intended as a
formal presentment and demand, is not sufficient to put
the note in dishonor.
A demand over the telephone is not sufficient
presentment to charge the indorser unless the maker,
by word or conduct, waives the right to ask for an
exhibition of the note.”
PRESENTMENT NOT NECESSARY TO CHARGE PERSONS
PRIMARILY LIABLE
A draws a bill payable to B or order. X, drawee,
accepts the bill which is due on March 31, 1950. B
negotiates the bill to C, C to D, D to E, E to F, now
holder. On April 1, 1950, the bill is still unpaid. But F
failed to make presentmentfor payment to X, acceptor.
Can F file an action against X and hold him liable on the
bill?
- Yes, because presentment for payment is not
necessary to charge the person primarily liable
on the instrument. This rule applies also to the
maker. It cannot be validly claimed that it is the
Reference: Commentaries and Jurisprudence on the Commercial Laws of the Philippines (Aguedo F. Agbayani)
presentment for payment of the bill to the
acceptor which is the operative act that makes
the acceptor liable under his acceptance. Before
he accepts, the drawee is a stranger to the bill
but from the moment of his acceptance, he
becomes bound ‘as a party primarily liable on
the instrument.
- He is bound according to the tenor of his
acceptance ad he cannot show, as against the
payee, that there was a subsequent agreement
between him and the drawer modifying the
terms of the acceptance.
RULE APPLICABLE TO DEMAND NOTES
The rule that presentment for payment is not
necessary to charge the person primarily liable on the
instrument applies to instruments payable on demand.
PRESENTMENT NECESSARY TO CHARGE PERSONS
SECONDARILY LIABLE
Presentment for payment to the person
primarily liable is necessary to charge the person
secondarily liable. Otherwise, they are discharged
except as otherwise provided for.
In the illustration, if the holder F fails to make
presentment for payment to X, acceptor, the il et A, and
the indorsers B, C, D and E are discharged and cannot
file an action against them. Hence, only one debtor X
would be left against whom he can enforce the bill.
The last statement of the provision simply means that
the instrument must be presented for payment on the
date and peed therein mentioned to charge the persons
secondarily liable such as drawers and indorsers. And
the instrument must be presented on the date of
maturity, if it is payable on a fixed date, or within a
reasonable time after issue, if it is a promissory note, or
within reasonable time after last negotiation, if it is a bill
of exchange, otherwise the drawer and indorsers are
discharged from liability.
NECESSARY STEPS TO CHARGE PERSONS SECONDARILY
LIABLE IN BILLS OF EXCHANGE IF:
If one of the following steps is not taken, the persons
secondarily liable are discharged and only the person
primarily liable is left to answer for the payment of the
instrument:
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1. In the three cases required by law, presentment
for acceptance to the drawee or negotiation
within reasonable time after acquisition unless
excused. In other cases aside from the three,
there is no need for presentment for
acceptance.
2. If the bill is dishonored by non-acceptance,
a. notice of dishonor by non-acceptance
must be given to persons secondarily
liable4’4—ii-n-less excused45 and, in
case of foreign bills,
b. protest for dishonor by non-acceptance
must be made46 unless excused.
3. But if the bill is accepted, or if the bill is not
required to be presented for acceptance, it
must be presented for payment to the persons
primarily liable48 unless excused.
4. 1f the bill is dishonored by non-payment,
a. a notice of dishonor by non-payment
must also be given to person
secondarily liable unless excused, and,
in case of foreign bills,
b. a protest for dishonor by non-
acceptance must be made’ unless
excused.
NECESSARY STEPS TO CHARGE PERSON SECONDARILY
LIABLE IN PROMISSORY NOTES
1. Presentment for payment must be made within
the period required2 to the person primarily
liable unless excused.
2. if the note is dishonored by non-payment,
notice of dishonor by non- payment must be
given to the persons secondarily liable4 unless
excused.
NECESSARY STEPS TO CHARGE PERSONS SECONDARILY
LIABLE IN OTHER CASE
1. Protest for non- payment by drawee is
necessary to charge an acceptor for honor6
or a referee in case of need.
2. protest -for non-payment by the acceptor
for honor is also required.
Reference: Commentaries and Jurisprudence on the Commercial Laws of the Philippines (Aguedo F. Agbayani)
Section 71: Presentment where instrument is not
payable on demand and where payable on demand
Where the instrument is not payable on
demand, presentment must be made on the day it falls
due.
Where it is payable on demand, presentment
must be made within reasonable time after its issue,
except that in the case of a bill of exchange,
presentment for payment will be sufficient if made
within reasonable time after the last negotiation
thereof.
WHEN PAYABLE AT A FIXED OR DETERMINED TIME
F must present the bill for payment to X on
March 31, 1950. A presentment before maturity is not
proper.
WHEN PAYABLE ON DEMAND IN CASE OF NOTES
Thus, suppose that A makes a note payable to B
or order. B negotiates to C, C to D, D to E, and E to F.
The date of the issuance of the note is April 1, 1950. F,
the holder, must present the note for payment to A,
maker, which reasonable time after April 1, 1950, the
date of issue.
WHEN PAYABLE ON DEMAND IN CASE OF BILLS
Thus, suppose that A issues a bill to B or order
on April 1, 1950. The date of its last negotiation is
December 31, 1950. The presentment must be made
within reasonable time after December 31, 1950, not
after April 1, 1950.
The last negotiation means the last transfer for
value, and subsequent transfers between banks for
purposes of collection are not negotiations within this
section. Consequently, the requirement of reasonable
time begins to run from the last taking for value.
Section 72: What constitutes sufficient presentment
Presentment for payment, to be sufficient,
must be made
a. By the holder, or by some persons
authorized to receive payment on his
behalf
b. At a reasonable hour on a business day
c. At a proper place as herein defined
d. To the person primarily liable on the
instrument, or if he is absent or
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inaccessible, to any person found at the
place where the presentment is made.
If the presentment made does not meet with any of
these requisites, it is not sufficient. The effect the same
as if no presentment is made, namely, the persons
secondarily liable are discharged.
WHO MAKES PRESENTMENT
Presentment for payment must be made by the
holder of the instrument or by some person authorized
to receive payment on his behalf. A presentment for
payment of a promissory note by a bank having it for
collection is sufficient.
In the illustration under Section 70, F holder, or his
agent duly authorized to receive payment, can make the
presentment for payment.
TIME FOR MAKING PRESENTMENT
What is reasonable hour on a business day
depends upon the general custom at the place of the
particular transaction.
Presentment for payment cannot be made on a
Sunday or holiday.
TO WHOM PRESENTMENT IS MADE
Presentment for payment is to be made to the
maker, if a note, or to the acceptor, if a bill, not to the
person secondarily liable.
A clerk found at the counting room of the
acceptor or promisor is a competent party for
presentment for payment to be made to, without
special authority given him. So also where a note is
payable at a certain store, presentment for payment at
such a store to a person connected therewith is
sufficient and no personal demand on the maker is
necessary.
Section 73: Place of presentment
Presentment for payment is made at the
proper place
a. Where the place of payment is specified in the
instrument ‘and it is there presented’;
b. Where no place of payment is specified but the
address of the person to make payment is
Reference: Commentaries and Jurisprudence on the Commercial Laws of the Philippines (Aguedo F. Agbayani)
given in the instrument and it is there
presented;
c. Where no place of payment is specified and no
address is given and the instrument is
presented at the usual place of business or
residence of the person to make payment;
d. In any other case, if presented to the person to
make payment wherever he can be found, or if
presented at his last known place of business
or residence
PLACE SPECIFIED
A makes a note in the following terms: “I
promise .to pay at the PNB, Manila, to X or order
P1,000.”
 The proper place for making presentment for
payment is at the PNB, Manila, the place
specified.’7 And where the name of the bank on
the check has been changed, presentment for
payment at the bank the name of which had
been substituted and not at ‘the original named
bank, is also sufficient.
 But where a note is payable at a designated
branch of a trust company, presentment at the
principal office or at any other branch of the
company is not sufficient.
ADDRESS GIVEN
In a promissory note made by Y, no place is
specified for payment but it is signed as follows: “(Sgd.)
Y, 404 Regina Bldg., Manila.”
- The proper place for making presentment for
payment is 404 Regina Bldg., Manila.
USUAL PLACE OF BUSINESS ET.
The note does not specify a place for payment.
Neither is the address of the person to pay given. But
the maker or acceptor resides in 12 Quiricada St. and
has a business office at 240 Calvo Bldg., Manila. Either
place is proper for making presentment for payment.
ANY OTHER PLACE
When the holder meets the maker or acceptor
while waiting at the Escolta, presentment may properly
be made there.
Section 74: Instrument must be exhibited
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The instrument must be exhibited to the This section applies to an instrument which is payable at
person from whom payment is demanded, and when it a bank, such as a bill which reads: “Pay to B or order
is paid, must be delivered up to the party paying it. P1,000.00 at the PNB. (Sgd.) A, to X.”

NECESSITY OF EXHIBITION OF INSTRUMENT The banking hours are from 9:00 A.M. to 2:30
Presentment includes not only demand for P.M. from Monday to Friday. There are no banking
payment but also the exhibition of the instrument. The hours on Saturday. Consequently, in the illustration,
purpose of exhibition is to enable the debtor: presentment for payment must be made between 9:00
a. to determine the genuineness of the instrument A.M. to 2:30 P.M. on ordinary days. Otherwise, the
and the right of the holder to receive payment; presentment would not be sufficient, and persons
and secondarily liable on the bill are discharged.
b. to enable him to reclaim possession upon But the person to make payment has until the
payment “No valid presentment and demand close of banking hours of the bank where the
can be made by any person without having the instrument is made payable in which to pay it, and if
note in his possession at the time, so that the before the close of such hours, he deposits funds there
maker may receive it in case he pays the enough to pay it, a demand earlier in the day is
amount due unless special circumstances, such premature.
as the loss of the note or its destruction are
shown to excuse its absence.
WHEN PRESENTMENT MAY BE MADE AFTER BANKING
DEMAND BY TELEPHONE HOURS
. ‘Is demand by telephone sufficient? No, But where X -has no funds sufficient to meet the
because exhibition of the instrument is not possible. bill on the day of presentment, the presentment may be
made before 4:00 P.M., and such presentment would
So where F, holder, merely demands payment be sufficient as at any rates the bill cannot be paid even
from X,acceptor, without exhibiting the bill, there is no if presented during banking hours
presentment for payment, and the drawer and
indorsers are discharged.

WHEN EXHIBITION EXCUSED Section 76: Presentment where principal debtor is

Actual exhibition is not necessary in the dead
following cases: Where the person primarily liable on the
A. When the debtor does not demand to see the instrument is dead and no place of payment is
instrument but refuses payment on some other specified, presentment, for payment must be made to
grounds, and his personal; representative, if such there be, and if,
B. When the instrument is lost or destroyed. with the exercise of reasonable diligence, he can be
found.

Section 75: Presentment where instrument payable at In the case of the death of the person primarily liable,
bank presentment for payment may be made to his executor
Where the instrument is payable at a bank, or administrator:
presentment for payment must be made during 1. If there be one
banking hours, unless the person to make payment has 2. If he can be found
no funds there to meet it at any time during the day, in The holder must use diligence to find the personal
which case presentment at any hour before the bank is representative, if there be one. Although the indorser
closed on that day is sufficient. himself be the personal representative presentment has
been held necessary

Reference: Commentaries and Jurisprudence on the Commercial Laws of the Philippines (Aguedo F. Agbayani)
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Section 77: Presentment to persons liable as partner
Where the person primarily liable on the
instrument are liable as partners, and no place of
payment is specified, presentment for payment may
be made to any one of them, even though there has
been a dilution to any one of them, even though there
has been a dissolution of the firm.
Presentment for payment may be made to any
one of the partners, even if their partnership has been
dissolved. The reason is that each partner is an agent of
the partnership. Accordingly, in case of death of one of
the makers who are partners, presentment shall not be
made to his personal representative but to the surviving
partner.
Section 78: Presentment for joint debtors
Where there are several persons, not partners,
primarily liable on the instrument, and no place of
payment is specified, presentment must be made to
them all.
But if the persons primarily liable are not
partners, presentment must be made to all of them.
Thus, an informal demand on one of the joint makers is
not a basis for charging indorsers. Of course, if one of
them is duly authorized by the others for the purpose,
presentment to him would be sufficient.
SECTION 76-78 NOT APPLICABLE WHERE PLACE
SPECIFIED
Section 79: Where presentment not required to charge
the drawer
Presentment for payment is not required in
order to charge the drawer where he has no right to
expect or require that the drawee or acceptor will pay
the instrument.
Section 80: Where presentment not required to charge
the indorser
Presentment is not required in order to charge
an indorser where the instrument was made or
accepted for his accommodation and he has no reason
to expect that the instrument will be paid if presented.
Reference: Commentaries and Jurisprudence on the Commercial Laws of the Philippines (Aguedo F. Agbayani)
Section 79-80 give two exceptions to the
general rule that if no presentment for payment is
made, the persons secondarily liable are discharged.
However the exceptions herein stated are relative Only
the drawer or indorser referred to in these sections is
not discharged, but all other parties secondarily liable
are relieved of their liability
WHEN DRAWER NEED NOT GIVEN NOTICE
Where A, drawer, withdraws his funds from X,
drawee, so that they are not sufficient to pay the bill, he
has no right to expect or require that the drawee or
acceptor would pay the instrument?
Accordingly, where F, holder, does not make a
presentment to X, A, drawer, wou1d not be discharged
by such failure. But the other parties secondarily liable
are discharged. Where, however, the drawer made
arrangement with the drawee for the payment of the
bill, presentment is still necessary to charge him.
ILLUSTRATIONS: PRESENTMENT NOT REQUIRED TO
CHARGE THE DRAWER IN THE FOLLOWING CASES:
1. In case of a check upon which payment has
been stopped.
2. Where the drawer’s balance is less than the
amount of the check.32 However, the mere fact
that the drawer has no funds in the “drawee’s”
hands at the time he draws, does not render
presentment unnecessary if he still has
reasonable grounds to believe that the
instrument will be paid, particularly when
provision has been made for payment of any bill
drawn’ by the drawer on the drawee.
3. Where the drawer of a bill containing the words
“Pay from balance” had no money on deposit
with the drawee but expected to arrange with
the broker to cover drafts?
WHEN INDROSER NEED NOT BE GIVEN NOTICE
d not make presentment for payment to A, in
order to charge B, indorser. The reason is that as B did
not give value to A, B has no reason to expect that the
note will be paid upon presentment. But C, D, and E are
discharged as no presentment has been made. In effect,
the accommodated party is the person primarily
liable.35 Hence, following the rule that failure to make
presentment for payment will not discharge the persons
primarily liable, the accommodated payee-indorser,
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being in effect the person primarily liable, is not
discharged even if no presentment for payment is
made.
Section 81: When delay in making presentment is
excused
Delay in making presentment for payment is
excused when the delay is caused by circumstances
beyond the control of the holder and not imputable to
his default, misconduct, or negligence. When the cause
of delay ceases to operate, presentment must be made
with reasonable diligence.
EXCUSES FOR DELAY
Delay in presentment is excused by
overwhelming:
 calamity,
 malignant diseases,
 interruption of trade negotiations by political
circumstances,
 war between maker’s and holder’s countries
 suspension of commercial intercourse by public
enemy,
 occupation of country where parties reside or
where instrument is payable,
 or by public and positive interdictions and
prohibitions of state,
 and impracticability of finding maker or his
place of residence.
SECTION 82: WHEN PRESENTMENT MAY BE DISPENSED
WITH
Presentment for payment is dispensed with:
a. where after the exercise of reasonable
diligence presentment as required by this ACT
cannot be made.
b. Where the drawee is a fictitious person
c. By waiver of presentment, express or implied.
What is excused is the failure to make presentment for
payment, not mere delay, as under Section 81. Under
Section 82, the law does not require presentment at any
time. Under Section 81, the law requires presentment
when the cause of the delay has ceased.
WHERE DRAWEE FICTITIOUS
Reference: Commentaries and Jurisprudence on the Commercial Laws of the Philippines (Aguedo F. Agbayani)
Presentment for payment is not required as
there is no one to whom presentment is to be made.
WAIVER
Waiver may be express or implied. The
following contains an express waiver:
Payable to B or order P1,000.00. Presentment waived.
To X (Sgd.) Y
Thus, where the maker expressly waived
“demand, presentment, protest and notice of protest
and non-payment” of the note, he cannot question the
failure of the holder to exhibit to him his promissory
note.
IMPLIED WAIVER
Implied waiver of presentment may be
manifested by any language or conduct or any
agreement between the parties reasonably calculated
to lead the holder to believe that presentment is waived
or to mislead or prevent him from treating the bill as he
otherwise would.
ILLUSTRATIVE CASES OF IMPLIED WAIVER:
 declarations, acts or conduct which mislead the
holder and induce him from taking the
necessary steps to make presentment.
 Drawer A tells holder F that he will take care of
collecting the bill. This is waiver on his (A’s)
part, and if F fails to make presentment, A is not
discharged.
 Holder failed to make presentment to the
drawee. Thereafter, the drawer paid part of the
bill and promised orally to pay the rest. This is
implied waiver of presentment.
 Where the maker before maturity of the note,
was adjudged a bankrupt partly upon his
written admission of inability to pay the debts
with a willingness that he be adjudged a
bankrupt.
 Where the indorsers of a note payable at a
bank, had assured the holder that it could not
be paid at maturity and knew that the maker, a
corporation, had no money to pay for it.
 Where the indorser assured the holder, before
maturity of the note, that a note for the same
amount with his indorsement will be given in
renewal, such assurance, if relied by the holder.
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 When the maker on the day of maturity of the deemed dishonored when, on March 2, 1950, it
note telephoned the holder that he could not is not paid even if the holder such as F did not
then pay the note and the holder then make a presentment. But if the presentment is
telephoned the maker consenting in giving not excused, the bill is not dishonored by the
further time to the maker. mere fact that the bill is overdue and unpaid.

SUMMARY OF RULES AS TO PRESENTMENT FOR

PAYMENT
1. Presentment for payment is not necessary to
charge persons primarily liable. Section 84: Liability of person secondarily liable, when
2. But it is necessary to charge person secondarily instrument dishonored
liable except: Subject to the provisions of this act, when the
a. as to drawer, under Section 79; instrument is dishonored by non-payment an
b. as to indorser, under Section 80; immediate right of recourse to all parties secondarily
c. when dispensed with under Section 82; liable thereon accrues to the holder.
and
d. when the instrument has been As to the holder, after an instrument is
dishonored by non-acceptance. dishonored by non-payment, the persons secondarily
liable thereon cease to be secondarily liable. They
become principal debtors and their liability becomes
Section 83: When instrument dishonored by non- the same as that of the original obligors.
payment This is, of course, provided that notice of
The instrument is dishonored by non-payment dishonor is given to them, they are discharged.
when: In other words, notice of dishonor must be
a. It is duly presented for payment and given to them first, after which the holder can bring an
payment is refused or cannot be obtained action against any one of them, without necessity of
b. Presentment is excused and the first bringing an action against the person primarily
instrument is overdue and unpaid. liable. But where persons secondarily liable are charged
by dishonor and notice, while it is true that they
WHEN PAYMENT IS REFUSED become principal debtors as to the holder, yet as among
1. the instrument must be .presënted for the persons secondarily liable are presumed liable in the
payment; order they become parties to the instrument. Hence,
2. Payment is either refused or cannot be using the illustration, if F, holder, Collectš from D, D’
.obtained ‘can collect from but not from E.
Thus, suppose that F holder makes presentment for
payment to X, acceptor, and X refuses to pay, or F
cannot obtain payment as although X is willing to pay,
he has no money to pay; or where X fails to pay on the
date of maturity but promises to pay five days later.

Section 85: Time of maturity

WHEN PRESENTMENT EXCUSED Every negotiable instrument is payable at the
1. payment be excused; time fixed therein without grace. When the day of
2. the instrument be overdue, and maturity falls upon Sunday or a holiday, the
3. it be unpaid. instruments falling due or becoming payable on
Saturday are to be presented for payment on the next
Thus, suppose that presentment is waived succeeding business day expect that instruments
and the due on March 1, 1950. The bill is payable on demand may, at the option of the holder,
Reference: Commentaries and Jurisprudence on the Commercial Laws of the Philippines (Aguedo F. Agbayani)
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be presented for payment before 12 o clock noon on “To X: 30 days from date, to pay B or order P1,000.00.
Saturday when that entire day is not a holiday. (Sgd.) A.”
To compute the period, exclude March 1, then
PAYMENT WHERE INSTRUMENT PAYABLE AT FIXED count 30 days, and include the 30th day, March 31,
RATE 1950, the date of payment. But one dated January 31
. Where, for instance, the instrument is payable and payable one month after date will mature on
on June 16, 1950, no glace is to be granted. Hence, February 28, or February 29, if it is a leap year.9
presentment must be made on that date. . But where It must be remembered that on the day of
June 16, 1950 falls on a Sunday or a holiday, it is payment, the party liable is entitled to the whole of that
payable on Monday or the succeeding business day. day within which to make payment. Thus, if the due
Presentment must, therefore, be mad on that date was July 5, 1923, an action dated July 5, ‘1923 was
succeeding business day. held to be prematurely brought.

FALLING DUE ON SATURDAY

Where a bill is payable on June 16, 1950, which
happens to be a Saturday, the bill is said to be
instrument falling due on a Saturday. Section 87: Rule where instrument payable at bank
Where the instrument is made payable at a
BECOMING PAYABLE ON A SATURDAY bank, it is equivalent to an order to the bank to pay
Where a bill is payable on June 16, 1950, which the same for the account of the principal debtor
falls on a Friday, and supposing that Friday is a holiday, thereon.
the bill is said to have become payable on a Saturday.
This section applies only where the instrument is
WHEN PRESENTMENT TO BE MADE payable at a particular named bank.
Where the instrument falls due on a Saturday or
becomes payable on a Saturday, when must A makes a note as follows: “I promise to pay to
presentment be made? B or order P1,000.00 at the PNB. (Sgd.) A.”
The time for making presentment depends
upon whether the , instrument is payable at a fixed This is equivalent to an order to pay addressed
determinable future time or on demand. to PNB by A, maker. The PNB may charge the amount of
 Where the instrument is payable at a fixed or the note from the account of A without further
determinable future time, in both cases, authority
presentment must be made on the . next
succeeding business day’ that is, in the
illustration, on Monday, June 19, 1950. EFFECT OF FAILURE TO MAKE PRESENTMENT FOR
 Where instrument is, payable on demand in PAYMENT
both cases, presentment must he made on But suppose that B or any subsequent holder
Saturday, June 17, 1950, beforé’12:Ü& noon or fails to make a presentment for payment at the PNB, is
on Monday, June 19, 1950, at the option of the A, maker, discharged?
holder. - There is a conflict of authorities. But the better
view seems to be that A is not discharged
Section 86: Time; how computed because he is primarily liable.
When the instrument is payable at a fixed
period, after date, after sight, or after the happening of
a specified date, the time of payment is determined by
excluding the day from which the time is to begin to
run, and by including the date of payment.

A draws a bill dated March 1, 1950, thus: Section 88: What constitutes in due course
Reference: Commentaries and Jurisprudence on the Commercial Laws of the Philippines (Aguedo F. Agbayani)
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Payment is made in due course when it is pay it again. The possession of notes by the maker is
made at or after the maturity of the payment to the presumptive evidence that the notes are paid. But the
holder thereof in good faith and without notice that payee’s possession of the instrument raises the
his title is defective. presumption that they are not paid.

REQUISITES FOR PAYMENT IN DUE COURSE:

1. payment must be made at or after the date of PAYMENT THROUGH BANKS
maturity A bank to which a note is sent for collection is
2. payment must be to the holder; the agent of the owner. It is immaterial that the maker
3. payment must be made by the debtor in good has requested the holder to send the note to this bank
faith and without notice that the holders’ title is for collection..
defective

THUS: CREDITING OF ACCOUNT CONSTITUTES PAYMENT

1. If payment is made before maturity, it would Where a check is presented by the payee or
constitute a negotiation back to the person holder to the bank on which it is drawn, and received as
primarily liable and he can re-negotiate it.12 a deposit and credited to his account, this amounts, in
The payment does not discharge the the absence of fraud, to a payment of the checks, just as
instrument. if currency had been paid over the counter and
2. Payment to indorsee who is not in possession of immediately redeposited.
the instrument is not payment in due course, as
he is not the holder.
a. So that the payment to the person
other than the holder is at the risk of
the party so paying if the person was
not authorized by the holder to receive
payment. So also, the payment to the
original payee after the note had been
transferred by him to a holder in due
course does not discharge the note.
3. Payment to a person by the debtor who knows
that such person stole it, is not payment in dee
course, as such payment is not in good faith.
The maker of a note or the acceptor of a bill
must satisfy himself, when it is presented for
payment, that the holder traces his title through
genuine indorsements, and if there is a forged
indorsement, it is a nullity and no right passes
by it.

PAYMENT MUST BE MADE TO POSSESOR OF

INSTRUMENT
The party making payment must insist on the
presentment of the paper by the party demanding
payment in order to make sure that it is at the time in
his possession and not outstanding in another.
A receipt taken will be no protection. If at the
time he makes payment, the instrument is outstanding
and held by a holder in due course, he will be liable to
Reference: Commentaries and Jurisprudence on the Commercial Laws of the Philippines (Aguedo F. Agbayani)