LIABILITIES OF PARTIES
MAKER
MAKER PRIMARILY LIABLE
 maker to pay absolutely for the
note according to its tenor
 liability is primarily and
unconditional
 presumed to have acted with
care and to have signed the
instrument with full knowledge
of its contents, unless of
course, if fraud is proved
ADMITS PAYEE’S EXISTENCE,
ETC.
1. admits existence of the
payee
2. admits payee’s then capacity
to indorse
3. precluded from setting up the
following defenses:
 That the payee is a fictitious
person
o he admits that the
payee exists
 That the payee was insane, a
minor, or a corporation acting
ultra vires because by
making the note,
o he admits the then
capacity of the payee to
indorse
MAKER MUST PAY ACCORDING
TO THE TERMS OF THE NOTE
maker bound himself to pay
personally.
cannot shift the obligation without
the consent of the payee.
cannot allege that he spends the
money on expenses which should
be charged to a trust administered
by a creditor because it is not the
payee’s concern to know how the
proceeds should be spent. That is
DRAWER ACCOMODATION PARTY AGENT PAYEE/INDORSER DRAWEE/ ACCEPTOR
DRAWER SECONDARILY LIABLE 1. Liability of Accommodation Party Liability of an Agent Liability of Indorsers: ACCEPTOR PRIMARILY LIABLE
 Acceptor engages to pay absolutely
ADMITS PAYEE’S EXISTENCE  one who signed instrument as he is not liable on the Qualified Indorser and one Negotiating by o according to the tenor of its acceptance
 existence of the payee maker/drawer/acceptor/ indorser instrument Delivery  His liability is not subject to any condition
 and his capacity to indorse  w/o receiving value thereof, if he was duly authorized, 1. Instrument genuine, in all  The acceptor is the drawee who accepts the bill
 for the purpose of lending his name to respects what it purports to be  His acceptance immediately places a legal liability on him for
THAT THE BILL WILL BE some other person MUST DISCLOSE HIS 2. good title the payment of the bill in favor of one who became a holder
ACCEPTED OR PAID OR BOTH, PRINCIPAL; mere addition of 3. all prior parties had capacity to thereof after acceptance,
according to its tenor, words describing him as an contract
 AP liable on the instrument to
agent does not exempt from 4. he had no knowledge of any
o and if he wants to escape liability, it is up to him to
holder for value even if holder, at show that he is a
HE WILL PAY ONLY WHEN personal liability. fact w/c would impair validity of  mere agent of the drawer,
time of taking instrument, knew he
 It is dishonored instrument or render it  or allege and prove any other defense
was only an AP
 And the necessary proceedings of Signature per procuration valueless which he has to the liability
dishonor are duly taken
 Liability of Irregular Indorser  notice that the agent has  in case of negotiation by
 a person not a party to an but a limited authority to
delivery only, WARRANTY EFFECT OF MORTGAGE EXECUTED BY ACCEPTOR
liability subject to the two conditions and attaches instrument, sign, ONLY EXTENDS IN FAVOR
 Where being unable to pay certain bills of exchange
only upon their fulfillment  places thereon his signature  and the principal is OF IMMEDIATE
 which the drawee has accepted,
in blank bound only in case the TRANSFEREE
 the latter makes a mortgage in favor of the holder of said bills
 The drawer, by merely drawing the bill  before delivery, agent in so signing
 upon certain merchandise
and signing his name in the bill as such  he’s liable as an indorser,  acted within the Liability of a General or Unqualified
 the value of which is sought to be collected through said bills,
drawer, without more, impliedly  in accordance w/ these rules: actual limits of his Indorser
 in order to secure the payment of said amount if the
engages to be so secondarily liable, as authority 1. instrument genuine, good title,
merchandise is sold
if he has incorporated the provisions of 1. Instrument payable to order of capacity of prior parties
3rd person: liable to payee and to all Where a broker or agent  and the integrity thereof while the sale is not effected,
Section 61 in the bill 2. instrument is at time of
subsequent parties negotiates an instrument  THE EXECUTION OF SAID MORTGAGE DOESN’T
 If the bill is not paid, accordingly, indorsement valid and
2. Instrument payable to the order of without indorsement, he CONSTITUTE A NOVATION OF THE OBLIGATION
the drawer becomes liable for the subsisting
maker/drawer, or payable to incurs all liabilities in Sec. REPRESENTED BY SAID ACCEPTED BILLS UNLESS IT IS
payment of its value to the holder 3. on due presentment, it shall be
bearer: liable to all parties 65, unless he discloses EXPRESSLY STATED IN THE MORTGAGE
provided that notice of dishonor is accepted or paid, or both,
subsequent to make/drawer name of principal and fact
given according to tenor
3. Signs for accommodation of payee, that he’s only acting as agent 4. if it be dishonored, and ACCEPTOR TO PAY ACCORDING TO TENOR OF HIS ACCEPTANCE
liable to all parties subsequent to necessary proceedings on  maker to pay according to the tenor of the note,
SECONDARILY LIABLE TO payee  acceptor to pay according to the tenor of his acceptance,
dishonor be duly taken, he will
1. The holder o not of the bill he accepts
pay the amt. To holder, or to
2. Or if any of the indorsers intervening Sadaya v Sevilla Rules: o Tenor of his acceptance may be different from the
any subsequent indorser who
between the holder and the drawer is 1. a joint and several accommodation tenor of the bill,
may be compelled to pay it
compelled to pay by the holder, the maker of a negotiable promissory o may accept the bill with qualifications
drawer, will be liable to that indorser so note may demand from the Order of Liability among Indorsers  If acceptance is general,
compelled to pay principal debtor reimbursement for 1. among themselves: liable o tenor of then bill same tenor as of his acceptance
the amt. That he paid to the payee prima facie in the order they
DRAWER OF UNACCEPTED BILL PRIMARILY 2. a joint and several accommodation indorse, but proof of another WHERE ORIGINAL TENOR IS ALTERED BEFORE ACCEPTANCE
LIABLE makers who pays on the said agreement admissible  Suppose the bill is originally for P1000.
 DRAWER PRINCIPAL DEBTOR promissory note may directly 2. but holder may sue any of the
BEFORE ACCEPTANCE BY  Before the drawee X accepts it,
demand reimbursement from his indorsers, regardless of order o it is altered by the payee B to P4000.
DRAWEE/ACCEPTOR, co-accommodation maker without of indorsement
 SECONDARILY LIABLE AFTER  Then X accepts it.
first directing his action vs. the 3. joint payees/indorsees deemed
ACCEAPTANCE BY principal debtor provided:  How much is X liable to a holder in due course?
to indorse jointly and severally
the sole concern of the maker.
 The payee’s interest is
merely to see that the
note is paid according MAY LIMIT HIS LIABILITY
to its term.
LIABILITY OF 2 OR MORE
MAKERS
 When 2 or more
makers sign jointly or
severally,
 each of them is
individually liable for
the payment of the full
amount of their
obligation
 even if one of them
didn’t receive part of
the value given
therefor,
 as he would be
considered as an
accommodation party
DRAWEE/ACCEPTOR, 1.
2.
 by express stipulation
 By adding words such as
o “without recourse” or
o “I shall not be liable in case
of non-payment or non-
acceptance”
he made the payment by According to one view,
virtue of a judicial  X is liable for P4000 and not P1000.
demand  The reason is that the tenor of X’s acceptance is for P4000.
or the principal debtor is
insolvent EFFECT OF SECTION 124
 Under the first view, what is the effect of Section 124 which
provides that a holder in due course can recover only the
original tenor of the instrument?
 It seems that this refers to the original tenor of instrument taken
from the standpoint of the person primarily liable, in
X’s standpoint.
 In other words, the original tenor of the instrument is P4000,
which is the tenor of X’s acceptance.
 If after his acceptance,
o a subsequent indorsee alters the bill to read
P9000,
o then X could be liable for P4000 only,
o the original tenor of his acceptance,
o even as to a holder of due course.
ADMISSION OF DRAWER’S EXISTENCE, ETC.
 Drawer’s existence
 The genuineness of the drawer’s signature
 The capacity and authority of the drawer to draw the
instrument
 DOESN’T ADMIT THE GENUINENESS OF THE INDORSER’S
SIGNATURES
EFFECT OF ACCEPTOR’S ADMISSIONS
 precluded from setting up the defense THAT drawer is non-
existent or fictitious
 that drawer’s signature is a forgery
o he admits the genuineness of the drawer’s
signature
 defense of want of consideration between him and the drawer
o he admits the capacity and authority of the
drawer to draw
the bill