NEGOTIABLE INSTRUMENTS LAW

School Year 2022

Atty. BRENJUNE BLISS GERONG-CALAPRE
 
Title I
PRELIMINARY CONSIDERATIONS

a.)  Characteristics of negotiable instrument (page 4)

1. Negotiability
2. Accumulation of secondary contracts

b.)  Functions of a negotiable instrument (page 3)

1. As a substitute for money
2. As a medium of exchange for most commercial transactions
3. As a medium of credit transactions

c.) Classes of negotiable instrument- common forms (page 6)

1. Promissory note
2. Bill of exchange

d.)  Life of a negotiable instrument (UST reviewer)

1. Issue
2. Negotiation
3. Presentation for acceptance
4. Acceptance
5. Dishonor by non-acceptance
6. Presentment for payment
7. Dishonor by non-payment
8. Notice of dishonor
9. Protest
10. Discharge
 
CASES: Phil. Educ. Co., Inc. vs. Soriano, 39 SCRA 587
Tibajia, Jr. vs. CA, 223 SCRA 163
Philippine Airlines vs. CA, 181 SCRA 557
 Title II
FORM AND INTERPRETATION
 
Requisites of negotiability (Sec.1, NIL) (page 11)
1. Must be in writing and signed by the maker or drawer
2. Must contain an unconditional promise or order to pay a sum certain in money
Mere authorization – not a direction, giving the drawee a discretion to pay or not to pay
 
Metropolitan Bank & Trust Company vs. CA, Feb. 18, 1991, 194 SCRA 169
– treasury warrants are not negotiable
Caltex Phils. Vs. CA, 212 SCRA 448

3. Payable on demand or at a fixed or determinable future time

4. Payable to order or bearer (negotiability 4, 7)
 
Ang Tek Lian vs. CA, 87 Phil. 383 - continuation
PNB vs. Rodriguez, G.R. No. 170325, September 26, 2008
 
5. Omissions that do not affect negotiability
6. Additional provisions not affecting negotiability
 
Philippine National Bank vs. Manila Oil Refining & By-Products Company,
43 Phil 445

a.) Rules to be followed in interpreting negotiable instruments

Sps. Evangelista vs. Mercator Finance Corporation, et al, August 21, 2003
                       Ilano vs. Hon. Espanol, G.R. No. 161756, 16 December 2005

Title III
    NEGOTIATION
a. Modes of transfer

1.   By assignment
2.    By operation of law
3.    By negotiation, which may be completed by indorsement
completed by delivery or by mere delivery

b. Concept of negotiation; distinguished from assignment

 Sesbreño vs. CA, 222 SCRA 466
          Consolidated Plywood Inc. vs. IFC Leasing 149 SCRA 448
 
c. Ways of negotiation (in case of order or bearer instruments)
d. Concept of delivery
 
De la Victoria vs. Hon. Burgos, 245 SCRA 374
                             Development Bank of Rizal vs. Sima Wei, 219 SCRA 736

e. Indorsement

 Concept
 How made
 Kinds
 Other rules on indorsement
Metropol (Bacolod) Financing vs. Sambok Motors Co., et al., 12
SCRA 864 Gempesaw vs. CA, 218 SCRA 622           
 
f. Negotiation by a prior party
 
Title IV - Midterm
HOLDERS
 

a. General concept of holder

b. Holder in due course (requisites)
c. Presumption of due course holding
d. Rights of holders in due course
e. Shelter Rule

De Ocampo vs. Gatchalian, 03 SCRA 596

                              Yang vs. CA, G.R. No. 138074, August 15, 2003
                              Mesina vs. IAC, 145 SCRA 497

Title V
LIABILITY OF PARTIES
 
a. Primary and secondary liability distinguished
b. Liability distinguished from warranties
c. Liability and/or warranties of parties
 1. Maker
2. Drawer
 Relationship with drawee
 Relationship with collecting bank
3. Acceptor
4. Indorsers
 General indorsers
 Qualified indorsers
 Order of liability
5. Parties negotiating by mere delivery
6. Other cases
 Irregular indorser
 Indorser of bearer instrument
 Accommodation party
 Agents signing on behalf of the principal

Astro Electronics vs. Roxas, et al., September 23, 2003

                    Garcia vs. Dionisio, December 8, 2003
                 Travel-on vs. CA, 210 SCRA 352
                    Gonzales vs. RCBC, 29 November 2006
                    Ang vs. Associated Bank, 05 September 2007
                    Far East vs. Gold Palace Jewelry, G.R. No. 168274, August 20, 2008

Title VI
DEFENSES

a. Real and personal defenses, distinguished.

b. Real defenses:
1. Minority and ultra vires acts
2. Non-delivery of an incomplete instrument
3. Fraud in factum
4. Forgery and want of authority
 Forgery of maker’s signature
 Of indorser’s signature
 Of drawer’s signature
 Forgery of bearer instruments
 5. Material alteration (partial real defense)

6. Extinctive prescription

b. Personal defenses:

1. Ante-dating or post-dating
2. Insertion of wrong date
3. Filling-up blanks beyond authority
4. Want of delivery of a complete instrument
5. Absence or failure of consideration
6. Simple fraud, duress, intimidation, force or fear, illegality of
consideration, breach of faith

International Corporate Bank vs. CA, 05 September 2006

     Samsung Construction vs. Far East Bank, 15 August 2004
   Metrobank vs. Cabilzo, 06 December 2006
   Bank of America vs. Philippine Racing Club, G.R. No. 150228, July 20,
2009

Title VII
ENFORCEMENT OF LIABILITY

a. Parties primarily liable and parties secondarily liable

b. General steps in enforcing liability

1. Promissory notes

 Presentment for payment

 Notice of dishonor

2. Bills of exchange

 Presentment for acceptance

 If dishonored by non-acceptance

 If accepted
c. Presentment for payment

1. Concept of presentment

2. Requisites for sufficiency

3. Instances where presentment is excused

4. When delay in presentment excused

d. Notice of dishonor

1. When dishonor of instrument occurs:

 Dishonor by non-payment

 Dishonor by non-acceptance

2. Who should give notice?

 Holder

 Agent

 Party who may be compelled to pay

3. Form of notice

4. To whom notice is given

 Party secondarily liable or agent

 Notice where party is dead

 Notice to partners

 Notice to persons jointly liable

 Notice to bankrupt

5. Time and place of notice

6. When notice is excused or unnecessary

 7. When delay in giving notice excused

Wong vs. CA, February 2, 2001

                 International Corporate Bank vs. Sps. Gueco, February 12, 2001
                    Arceo, Jr. vs. People of the Philippines, G.R. No. 142641, July 17,
2006
                     Allied Banking vs. CA, GG Sportswear, July 11, 2006.
 

Title VIII
DISCHARGE OF INSTRUMENTS
 
a. Concept of discharge

b. How instrument is discharge

1. Payment in due course

 By the principal debtor

 By the accommodated party

2. Intentional cancellation

3. Any act that discharges simple contracts

4. Principal debtor becomes a holder

c. Discharge of persons secondarily liable

Title IX
PROMISSORY NOTES and CHECKS 

I. Promissory note

a. Promissory note, concept

b. Special types of promissory notes

c. Uses of promissory note

II. Checks
 a. Checks defined

d. Effect when check is post-dated

e. Kinds of check

 Cashier’s and manager’s check

 Certified check

 Crossed check

 Memorandum and traveler’s check

f. Crossing of a Check

g. Distinctions between check and bill of exchange

h. Uses of Check

Bataan Cigar vs. CA, 230 SCRA 648

                  Villanueva vs. Nite, G.R. No. 148211, July 25, 2006
                 Equitable PCI vs. Ong, September 15, 2006
Security Bank and Trust Company vs. RCBC, G.R. Nos. 170984 &
170987, Jan. 30, 2009
 
 
 
 
 
 

 
Ignorantia juris
Neminem excusat