DISCHARGE AND

PAYMENT FOR HONOR

Sec. 119. Instrument; how discharged.
A negotiable instrument is discharged:

(a) By payment in due course by or on behalf of the principal debtor;

(b) By payment in due course by the party accommodated, where the instrument is made
or accepted for his accommodation;

(c) By the intentional cancellation thereof by the holder;

(d) By any other act which will discharge a simple contract for the payment of money;

(e) When the principal debtor becomes the holder of the instrument at or after maturity
in his own right.
What constitutes payment in due course
Payment is made in due course when it is made at or after the
maturity of the payment to the holder thereof in good faith and
without notice that his title is defective. (Sec.88)
 REQUISITES
1 Payment must be made at or after the maturity of
the instrument;

2 To the holder of the instrument;

3 In good faith and without notice that the holder's
title is defective.
the weight of authority is that the mere possession of a negotiable
instrument does not in itself conclusively establish either the right of
the possessor to receive payment, or of the right of one who has made
payment to be discharged from liability. Thus, something more than
mere possession by persons who are not payees or indorsers of the
instrument is necessary to authorize payment to them in the absence
of any other facts from which the authority to receive payment may be
inferred.

BPI v. CA (G.R. No. 136202[2007])

Suppose, the instrument is paid by a third person, will it have the
effect of discharging the instrument?
Sec. 119. Instrument; how discharged.
By payment in due course by the party accommodated, where the
instrument is made or accepted for his accommodation
Sec. 119. Instrument; how discharged.
By the intentional cancellation thereof by the holder
Cancellation; unintentional; burden of
proof
A cancellation made unintentionally or under a mistake or without
the authority of the holder, is inoperative but where an instrument
or any signature thereon appears to have been cancelled, the
burden of proof lies on the party who alleges that the cancellation
was made unintentionally or under a mistake or without authority.
(Sec.123)
Sec. 119. Instrument; how discharged.
By any other act which will discharge a simple contract for the
payment of money
Sec. 119. Instrument; how discharged.
Renunciation by holder
The holder may expressly renounce his rights against any party to
the instrument before, at, or after its maturity.

a Renunciation by the holder to the principal debtor

b Renunciation by the holder to the parties secondarily liable

An absolute and unconditional renunciation of his rights against the
principal debtor made at or after the maturity of the instrument
discharges the instrument. But a renunciation does not affect the
rights of a holder in due course without notice. A renunciation must
be in writing unless the instrument is delivered up to the person
primarily liable thereon. (Sec. 122)
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Sec. 119. Instrument; how discharged.
When the principal debtor becomes the holder of the instrument at
or after maturity in his own right

Requisites:
a) It is the principal debtor who reacquired the instrument
b) At or after maturity
c) In his own right
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When persons secondarily liable on the instrument are
discharged
A person secondarily liable on the instrument is discharged:
1. By any act which discharges the instrument;
2. By the intentional cancellation of his signature by the holder;
3. By the discharge of a prior party;
4. By a valid tender or payment made by a prior party;
5. By a release of the principal debtor unless the holder's right of
recourse against the party secondarily liable is expressly reserved;
6. By any agreement binding upon the holder to extend the time of
payment or to postpone the holder's right. to enforce the
instrument unless made with the assent of the party secondarily
liable or unless the right of recourse against such party is
expressly reserved. (Sec. 120)
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When persons secondarily liable on the instrument are
discharged
A person secondarily liable on the instrument is discharged:
1. By any act which discharges the instrument;
2. By the intentional cancellation of his signature by the holder;
3. By the discharge of a prior party;
4. By a valid tender or payment made by a prior party;
5. By a release of the principal debtor unless the holder's right of
recourse against the party secondarily liable is expressly reserved;
6. By any agreement binding upon the holder to extend the time of
payment or to postpone the holder's right. to enforce the
instrument unless made with the assent of the party secondarily
liable or unless the right of recourse against such party is
expressly reserved. (Sec. 120)
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with a reservation of right of recourse against all the parties

secondarily liable
When persons secondarily liable on the instrument are
discharged
A person secondarily liable on the instrument is discharged:
1. By any act which discharges the instrument;
2. By the intentional cancellation of his signature by the holder;
3. By the discharge of a prior party;
4. By a valid tender or payment made by a prior party;
5. By a release of the principal debtor unless the holder's right of
recourse against the party secondarily liable is expressly reserved;
6. By any agreement binding upon the holder to extend the time of
payment or to postpone the holder's right. to enforce the
instrument unless made with the assent of the party secondarily
liable or unless the right of recourse against such party is
expressly reserved. (Sec. 120)
Rights of party who discharges instrument
Where the instrument is paid by a party secondarily liable thereon,
it is not discharged; but the party so paying it is remitted to his
former rights as regard all out his own and all subsequent
indorsements and against negotiate the instrument, except:
1 Where it is payable to the order of a third person and has been
paid by the drawer; and
2. Where it was made or accepted for accommodation and has been
paid by the party accommodated. (Sec. 121)
M
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PAYMENT FOR HONOR
Where a bill has been protested for non-
payment, any person may intervene and pay it
supra protest for the honor of any person liable
thereon or for the honor of the person for
whose account it was drawn.(Sec.171)
CRITERIA ACCEPTANCE FOR HONOR PAYMENT FOR HONOR

When when a bill of exchange has been protested for when a bill has been protested for non-payment
available dishonor by non-acceptance or protested for and such, any person intervened and pay it
better security and is not overdue supra protest for the honor of any person liable
on the instrument or for the honor of the person
whose account it was drawn

Overdue bill is not overdue the bill is overdue

Nature of acceptor is a party primarily liable and the acceptor is a party secondarily liable only
Liability basis of liability is provided under Sec. 62

Consent of required before a bill of exchange is accepted not required

Holder for honor
CRITERIA ACCEPTANCE FOR HONOR
Form must be in writing and must indicate that it is an
acceptance for honor and must likewise be
signed by the acceptor for honor
Number there may be several acceptors for honor
Effects Acceptor is liable to the holder and to all parties
to the bill subsequent to the party for whose
honor he has accepted
Warranties engages that he will, on due, presentment, pay
the bill according to the terms of his acceptance
provided it shall not have been paid by the
drawee and provided also that it shall have been
duly presented for payment and protested for
non-payment and notice of dishonor given to him
PAYMENT FOR HONOR
must be attested by a notarial act of honor which
may be appended to the protest or form an
extension to it
only be one payer for honor
parties subsequent to the party for whose honor it
is paid are discharged but the payer for honor is
subrogated for and succeeds to both the rights and
duties of the holder as regards the party for whose
honor he pays and all parties liable to the latter
paying to the holder the amount of the bill and the
notarial expenses incidental to its dishonor, is
entitled to receive both the bill itself and the
protest.
Payment for honor;how made
1. The bill has been dishonored for non-payment. (Sec. 83)

2. Prior protest of the bill for non-payment has been made.(Sec.171)

3.
4. The payment for honor supra protest, in order to operate as such and not as a
mere voluntary payment, must be attested by a notarial act of honor which may
be appended to the protest or form an extension to it. (Sec. 172)

5. Declaration before payment for honor-the notarial act of honor must be

founded on a declaration made by the payer for honor or by his agent in that
behalf declaring his intntion to pay the bill for honor and for whose honor he
pays.(Sec.173)
Preference of parties offering to pay for
honor

Where two or more persons offer to pay the bill

for the honor of different parties, the person
whose payment will discharge most parties to
the bill is to be given the preference. (Sec.174)
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Effect on subsequent parties where bill is
paid for honor
Where a bill has been paid for honor:
1. All parties subsequent to the party for whose honor it is
paid are discharged

2. The payer for honor is subrogated for, and succeeds to,

both the rights and duties of the holder as regards the party
for whose honor he pays and all parties liable to the latter.
(Sec.175)
 AA offers
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BUT IF AA paid the bill for the honor of all parties to the bill,
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Where holder refuses to receive payment
supra protest
Where the holder of a bill refuses to
receive payment supra protest, he loses his
right of recourse against any party who
would have been discharged by such
payment. (Sec. 176)
 AA offers Rong’s Refusal
to pay for will render him
with NO Right of
the honor Recourse against
of the Cole
indorser
MIGS TAFFY RULFO DOREEN CATE ANO COLE RONG
drawer

indorser

indorser

indorser

Holder
payee
STRAWBERRY LEGARDE MINORES REVILLA
Rights of payer for honor
The payer for honor, on paying to the holder the
amount of the bill and the notarial expenses
incidental to its dishonor

1 Entitled to receive the bill itself and

2 The protest.(Sec.177)