1. Define Negotiable Instrument under Act 2031.

2.Distinguish a negotiable instrument from an ordinary

instrument under Philippine laws .

Section 1. Form of negotiable instruments. - An

instrument to be negotiable must conform to the
following requirements:
(a) It must be in writing and signed by the maker
or drawer;
(b) Must contain an unconditional promise or
order to pay a sum certain in money;
(c) Must be payable on demand, or at a fixed or
determinable future time;
(d) Must be payable to order or to bearer; and
(e) Where the instrument is addressed to a
drawee, he must be named or otherwise indicated
therein with reasonable certainty.

Doctrine of WUPPI

3. Section 1 WUPPI 2031.-must either be a promise

to pay or order to pay.

● SECTION 1 . FORM OF NEGOTIABLE

INSTRUMENTS : WUPPI

● MUST CONFORM TO THE FOLLOWING

ELEMENTS :
● a) written and signed by the MAKER OR
DRAWER

● WHO IS MAKER ? PROMISSORY

NOTE BORROWER OR DEBTOR.

● WHO IS DRAWER? PERSON SIGNING

ON THE CHECK OR BILL OF
EXCHANGE;

● With UNCONDITIONAL PROMISE OR

ORDER TO PAY A SUM CERTAIN IN
MONEY;

● PAYABLE ON DEMAND OR AT A
FIXED OR DETERMINABLE FUTURE
TIME;

● PAYABLE TO ORDER OR BEARER;

● INSTRUMENT IS ADDRESSED TO A
DRAWEE , MUST BE NAMED OR
OTHERWISE INDICATED WITH
CERTAINTY

● AN INSTRUMENT OF PAYMENT TO
BE COVERED BY ACT 2031 OR NI
LAW MUST BE NEGOTIABLE OR
TRANSFERABLE IMMEDIATELY.
● TO BE NEGOTIABLE MEANS:

● A) FROM THE FACE OF THE

INSTRUMENT – PAY TO ORDER OR
BEARER

● WHY? THIS SIGNIFIES CONSENT OF

THE MAKER OR DRAWER

● WHAT :KINDS OF NEGOTIABLE

INSTRUMENTS

● FORMS AND INTERPRETATION

● A. REQUISITES OF A NEGOTIABLE
INSTRUMENT

● B. RULES OF CONSTRUCTION AND

INTEPRETATION

● C. TYPES OF DOCUMENTS
NEGOTIABLE INSTRUMENTS

● D. DOCUMENTS NOT NEGOTIABLE

INSTRUMENTS

● HOW: .

● STEPS :

● ) ISSUANCE IN EXECUTION

● BORROWER
 ● A.. EFFECTS

● SECOND STAGE :TRANSFER/

NEGOTIATION PAYEE

● THIRD STAGE : INDORSEMENTS

a) IS A DEED OF SALE A NEGOTIABLE

INSTRUMENT?

b) IS A CERTIFICATE OF TIME DEPOSIT A

NEGOTIABLE INSTRUMENT?

d) IS A WITHDRAWAL SLIP A NEGOTIABLE

INSTRUMENT?

Sec.2. Certainty as to sum; what constitutes.---

The sum payable is a sum certain within the meaning

of this Act, although it is to be paid---  

(a) With interest; or

(b) By stated installments; or

  (c) By stated installments with a provision that, upon

default in payment of any

installment or of interest, the whole shall become

due; or

(d) With exchange, whether at a fixed rate or at the

current rate; or
 (e) With costs of collection or an attorney's fee, in
case payment shall not be made at maturity.

EXAMPLES :

1. “PAY TO PEDRO OR ORDER THE SUM OF

ONE MILLION PESOS ( Php 1,000,000.00 ) FROM
MY TIME DEPOSIT ACCOUNT WITH PERLAS NG
SILANGAN BANK.”

ANSWER: N/I OR NOT? REASON.

2. ) “PAY TO XYZ CORPORATION OR BEARER

THE SUM OF PESOS ONE MILLION ( Php
I,000,000.00 ) WHEN I MEET MYCREATOR.”

ANSWER :N/I OR NOT? REASON.

3. ). “PAY TO MS UNIVERSE FOUNDATION OR

ORDER THE SUM OF USDOLLARS ONE MILLION (
$1,000,000.00 ) FROM THE PROCEEDS OF MY
BORROWING FROM CITIBANK,N.A MANILA “.

ANSWER : N/I OR NOT? REASON

Sec. 3. When promise is unconditional. --- An
unqualified order or promise to pay is unconditional
within the meaning of this Act though coupled with---

(a)An indication of a particular fund out of which

reimbursement is to be made or a particular account
to be debited with the amount; or

(b) A statement of the transaction which gives rise to

the instrument.

But an order or promise to pay out of a particular

fund is not unconditional.

SESBRENO VS CA, 222 SCRA 466( 1993)

Petitioner made a placement with Philfinance.  The

latter delivered to him documents, some of which was
a promissory note from Delta Motors and a post-dated
check.  The post-dated checks were dishonored.  This
prompted petitioner to ask for the promissory note
from DMC and it was discovered that the note issued
by DMC was marked as non-negotiable.  As
Sesbreno failed to recover his money, he filed case
against DMC and Philfinance. 
 

HELD:
The  non-negotiability  of  the  instrument  doesn’t 
mean  that  it  is  non-assignable or transferable.  It
may still be assigned or transferred in whole or in
part, even without the consent of the promissory note,
since consent is not necessary for the validity of the
assignment. 
 
In  assignment,  the  assignee  is  merely  placed  in 
the  position  of  the 
assignors  and  acquires  the  instrument  subject  to 
all  the  defenses  that 
might have been set up against the original payee.

4. PARTIES TO A NEGOTIABLE INSTRUMENT.

5. Is there an oral NI ? No
6

7. kinds of negotiable instrument?

8. Kinds of non negotiable instrument?
9. Non –negotiable instrument can become a negotiable
instrument – note the checks were stamped non
negotiable but since they were accepted by BDO with
stamp of “all prior indorsements guaranteed “ then BDO
becomes an indorser of the the checks and bound to
honor the checks deposited. BDO vs Equitable bank.

Case law:
1. ANG TEK LIAN VS CA, 87 PHIL 383 ( 1950 ) – A CHECK
PAYABLE TO THE ORDER OF CASH IS A BEARER
INSTRUMENT HENCE DOES NOT NEED TO BE
ENDORSED BY THE DRAWER. IN THIS CASE, ANG TEK
LIAN ISSUED 1 CHECK PAYABLE TO CASH AND
DRAWN ON CHINA BANK FOR PHP 4000. THE
CHECKS WERE DELIVERED TO LEE HUA HONG IN
EXCHANGE OF MONEY GIVEN TO ANG TEK LIAN.
NEXT BUSINESS DAY , CHECK WAS PRESENTED FOR
PAYMENT TO CHINA BANK WHICH WAS
DISHONORED FOR INSUFFICIENCY OF FUNDS.ANG
TEK LIAN WAS HELD LIABLE FOR ESTAFA
UNDER ARTICLE 315 , PAR ( D) 2 BY ISSUING
UNFUNDEDCHECKS OR WITHOUT SUFFICIENT
BALANCE.
DEFENSE OF ANG TEK LIAN : NO INDORSEMENT BY
HIM SINCE HE IS THE DRAWER.
HELD : AS A CHECK PAYABLE TO THE ORDER OF CASH
IT IS A BEARER INSTRUMENT HENCE DOES NOT NEED
INDORSEMENT OF THE DRAWER. ( SECTION 9 )

3. PNB VS MANILA OIL REFINING AND BY-PRODUCTS

• COMPANY INC. 43 PHIL ( 1922)
• RULING : APPLIES SECT. 5 NIL ON ADDITIONAL
• CLAUSES IN PROMISSORY NOTE.
• FACTS: A PN IN FAVOR OF PNB CONTAINS A CLAUSE
• WHICH STATES IN CASE OF DEFAULT IN THE
PAYMENT
• OF THE LOAN , THE MAKER AUTHORIZES ANY ATTY.
• TO APPEAR AND CONFESS JUDGMENT FOR LOAN
• AND ATTORNEY’S FEES AND LITIGATION COSTS +
• WAIVER OF ALL ERRORS OR RIGHTS OF APPEAL.
• PNB CLAIMS THIS IS ALLOWED UNDER SECTION 5 (D)
• PNB VS MANILA OIL REFINING AND BY-PRODUCTS
• COMPANY INC. 43 PHIL ( 1922)
• RULING : APPLIES SECT. 5 NIL ON ADDITIONAL
• CLAUSES IN PROMISSORY NOTE.
• FACTS: A PN IN FAVOR OF PNB CONTAINS A CLAUSE
• WHICH STATES IN CASE OF DEFAULT IN THE
PAYMENT
• OF THE LOAN , THE MAKER AUTHORIZES ANY ATTY.
• TO APPEAR AND CONFESS JUDGMENT FOR LOAN
• AND ATTORNEY’S FEES AND LITIGATION COSTS +
• WAIVER OF ALL ERRORS OR RIGHTS OF APPEAL.
• PNB CLAIMS THIS IS ALLOWED UNDER SECTION 5 (D)

• 4. DBP vs SIMA WEI 3.DEVELOPMENT BANK OF RIZAL

VS SIMA WEI,
• PRODUCERS BANK ET AL.GR NO. 85419 MARCH 9,
1993
• ( 219 SCRA 736)
• RULING : APPLIES SECTION 16 NIL 2 WHICH
PROVIDES
• EVERY CONTRACT OF A NEGOTIABLE INSTRUMENT IS
• INCOMPLETE AND REVOCABLE UNTIL DELIVERY OF
• THE INSTRUMENT FOR THE PURPOSE OF GIVING
EFFECT
• THERETO.
• FACTS: SIMA WEI ISSUED 1 PROMISSORY NOTE FOR
• PHP 1, 820,000.00 PAYABLE ON OR BEFORE JUNE 24,
• 1983 TO DEVELOPMENT BANK OF RIZAL @ 32% P.A.
• INTEREST RATE. SIMA WEI PARTIALLY PAID BUT THE
• THE BALANCE WAS PAID THRU 2 CHECKS DRAWN ON
• CHINA BANK FOR PHP 500,000.00 EACH. HOWEVER
• THESE 2 CHECKS WERE NOT DELIVERED TO PAYEE
DBR
• BUT CAME TO BE IN POSSESSION OF LEE KIAN HUAT.
• THESE CHECKS WERE DEPOSITED TO THE ACCOUNT
• PLASTIC CORP WITH PRODUCERS BANK WITHOUT
• DBR’S INDORSEMENT. SAID CHECKS WERE ACCEPTED
• BY PRODUCERS’ BANK DESPITE THE FACT THAT CHECK
• IS A CROSSED CHECK AND NO INDORSEMENT OF
DBR.
• DBR SUE SIMA WEI, LEE KIAN HUAT PLASTIC COP
• AND PRODUCERS BANK
• HELD: NO CAUSE OF ACTION VS LEE KIAN HUAT, LEE
WHY?