NEGOTIABLE INSTRUMENTS LAW

Course Outline Atty. Maria Zarah R. Villanueva-Castro

PRELIMINARY CONSIDERATIONS
1. 2. ". Governing laws Concept of negotia le instru!ent Classes of negotia le instru!ent a. pro!issory note . ill of e#change %unctions of negotia le instru!ent Characteristics of negotia le instru!ent a. negotia ility . accu!ulation of secon'ary contracts )egotia le instru!ents co!pare' with other papers *'ocu!ent of title+ letter of cre'it+ certificate of stoc,+ pawn tic,et+ postal !oney or'er+ treasury warrant/egal ten'er character

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CASES: Phil. Educ. Co., Inc. v . So!i"no, #$ SCRA %&'( Ti)"*i", +!. v . CA, ,,# SCRA -.#( Phili//in0 Ai!lin0 v . CA, -&- SCRA %%'

1ORM AND INTERPRETATION O1 NEGOTIABLE INSTRUMENTS

1. Re0uisites of negotia ility *1ec. 1+ )2/a. 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 *1pro!ise or or'er to pay !ust e uncon'itional *areference to transaction *1ec. "+ )2/* source or pay!ent or account to e 'e ite' *2paya le in su! certain in !oney *aprovisions which 'o not affect certainty of su! paya le *ii- pay!ent of interest *1ec. 2+ )2/*iii- pay!ent y install!ents *1ec. 2+ )2/*iv- acceleration clause *1ec. 2+ )2/*v- pay!ent with e#change *1ec. 2+ )2/*vi- pay!ent of attorney3s fees *1ec. 2+ )2/CASES: M02!o/oli2"n B"n3 4 T!u 2 Co5/"n6 v . CA, 10). -&, -$$-, -$7 SCRA -.$( C"l208 Phil . v . CA, ,-, SCRA 77& c. payable on demand or at a fixed or determinable future time *1when paya le on 'e!an' *1ec. .+ )2/-

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when paya le at 'eter!ina le future ti!e *1ec. $+ )2/-

d. payable to order or bearer *1when paya le to earer *1ec. 4+ )2/*arule when instru!ent is paya le to a fictitious person*2when paya le to or'er *ato whose or'er the instru!ent !ay e !a'e paya le *1ec. 5+ )2/CASE: An9 T03 Li"n v . CA, &' Phil. #&#( PNB v . Rod!i9u0:, G.R. No. -';#,%, S0/205)0! ,., ,;;& e. omissions that do not affect negotiability (Sec.6 !"#$ f. additional pro%isions not affecting negotiability (Sec. & !"#$ *1sale of collateral securities *2confession of 6u'g!ent *"waiver of enefit *$option to re0uire so!ething in lieu of pay!ent

CASE7 Phili//in0 N"2ion"l B"n3 v . M"nil" Oil R0<inin9 4 B6=P!oduc2 Co5/"n6, 7# Phil 77% 2. Rules to e followe' in interpreting negotia le instru!ents *1ec. 1.+ )2/-

CASES: R0/u)lic Pl"n20! B"n3 v . CA, ,-. SCRA '#&( S/ . Ev"n90li 2" v . M0!c"2o! 1in"nc0 Co!/., 02 "l, Au9u 2 ,-, ,;;#( Il"no v . >on. E /"nol, G.R. No. -.-'%., -. D0c05)0! ,;;%

NEGOTIATION
1. 2. Mo'es of transfer Concept of negotiation *1ec. "8+ )2/-9 'istinguishe' fro! assign!ent

CASES: Rea' again7 S0 )!0?o v . CA, ,,, SCRA 7..( Con olid"20d Pl6@ood Inc. v . I1C L0" in9 -7$ SCRA 77& ". $. :ays of negotiation *in case of or'er or earer instru!entsConcept of 'elivery

CASES: D0 l" Aic2o!i" v . >on. Bu!9o , ,7% SCRA #'7( D0v0lo/50n2 B"n3 o< Ri:"l v . Si5" W0i, ,-$ SCRA '#. &. 2n'orse!ent a. concept . how !a'e *1ec. "1 ; "2+ )2/c. ,in's7 *1special an' lan, *1ec. "$ ; "&+ )2/*2con'itional *1ec. "4+ )2/*"0ualifie' *1ec. "5+ )2/*$restrictive *1ec. "( ; ".+ )2/'. other rules on in'orse!ent *1in'orse!ent of an instru!ent paya le to earer *1ec. $8+ )2/*2where instru!ent is paya le to two or !ore persons *1ec. 21+ )2/-

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instru!ent is 'rawn or in'orse' to a person as cashier *1ec. $2+ )2/where na!e of payee or in'orsee is !isspelle' *1ec. $"+ )2/in'orse!ent in a representative capacity *1ec. $$+ )2/presu!ption as to ti!e of in'orse!ent *1ec. $&+ )2/place of in'orse!ent *1ec. $(+ )2/stri,ing out of in'orse!ent *1ec. $5+ )2/transfer of an or'er instru!ent without in'orse!ent *1ec. $4+ )2/-

CASES: M02!o/ol BB"colodC 1in"ncin9 v . S"5)o3 Mo2o! Co., 02 "l., -,; SCRA &.7C( G05/0 "@ v . CA, ,-& SCRA .,, (. )egotiation y a prior party *1ec. &8+ )2/-

>OLDERS
1. General concept of a hol'er 2. <ol'er in 'ue course *re0uisites- *1ec. &2+ )2/a. instru!ent co!plete an' regular . ta,en efore over'ue *1rule in case of install!ent instru!ents *2rule in case of 'e!an' instru!ents *1ec. &"+ )2/c. notice of infir!ity or 'efect *1ec. &( ; &.+ )2/9 see also 1ec. &$+ )2/'. goo' faith e. hol'er for value ". =resu!ption of 'ue course hol'ing *1ec. &4+ )2/$. Rights of hol'ers in 'ue course *1ec. &.+ )2/&. 1helter Rule *1ec. &5+ )2/CASES: D0 Oc"5/o v . G"2ch"li"n, ;# SCRA %$.( Y"n9 v . CA, G.R. No. -#&;'7, Au9u 2 -%, ,;;#( M0 in" v . IAC, -7% SCRA 7$'

LIABILITY O1 PARTIES
1. =ri!ary an' secon'ary lia ility 'istinguishe' 2. /ia ility 'istinguishe' fro! warranties ". /ia ility an'>or warranties of parties a. Ma,er *1ec. (8+ )2/. ?rawer *1ec. 1ec. (1+ )2/*1relationship with 'rawee *2relationship with collecting an, c. Acceptor *1ec. 12. ; (2+ )2/'. 2n'orsers *1General in'orsers *1ec. ((+ )2/*2@ualifie' in'orser *1ec. (&+ )2/*"Or'er of lia ility e. =arties negotiating y !ere 'elivery *1ec. (&+ )2/f. Other cases7 *1irregular in'orser *1ec. ($+ )2/-

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in'orser of earer instru!ent *1ec. (.+ )2/acco!!o'ation party *1ec. 24+ )2/agents signing in ehalf of the principal

CASES: Phili//in0 N"2ion"l B"n3 v . Pico!n0ll, 02 "l, 7. Phil '-.( A 2!o El0c2!onic v . Ro8" , 02 "l., S0/205)0! ,#, ,;;#( G"!ci" v . Dioni io, D0c05)0! &, ,;;#( C!i olo9o= +o 0 v . CA, S0/2. -%, -$&$( S"d"6" v . S0vill", -$ SCRA $,7( T!"v0l=On v . CA, ,-; SCRA #%,( A9!o=Con9lo50!"20 Inc. v . CA, #7& SCRA #%;( Gon:"l0 v . RCBC, ,$ Nov05)0! ,;;.( An9 v . A oci"20d B"n3, ;% S0/205)0! ,;;'( 1"! E" 2 v . Gold P"l"c0 +0@0l!6, G.R. No. -.&,'7, Au9u 2 ,;, ,;;&( GonAales v. =hilippine Co!!ercial ;
2nternational Ban,+ et al.+ G.R. )o. 1582&.+ %e ruary 2"+ 2811

DE1ENSES
1. 2. Real an' personal 'efenses+ 'istinguishe'. Real 'efenses7 a. !inority an' ultra vires acts *1ec. 22+ )2/. non-'elivery of an inco!plete instru!ent *1ec. 1&+ )2/c. frau' in factum '. forgery an' want of authority *1ec. 2"+ )2/*1forgery of !a,er3s signature *2of in'orser3s signature *"of 'rawer3s signature *$forgery of earer instru!ents e. f. 3 ". !aterial alteration *partial real 'efense- *1ec. 12$ ; 12&+ )2/e#tinctive prescription

=ersonal 'efenses7 a. ante-'ating or post-'ating *1ec. 12+ )2/. insertion of wrong 'ate *1ec. 1"+ )2/c. filling-up lan,s eyon' authority *1ec. 1$+ )2/'. want of 'elivery of a co!plete instru!ent *1ec. 1(+ )2/e. a sence or failure of consi'eration *1ec. 25+ )2/f. si!ple frau'+ 'uress+ inti!i'ation+ force or fear+ illegality of consi'eration+ reach of faith *1ec. &&+ &( ; &.+ )2/-

CASES: S"l" v . CA, +"nu"!6 ,,, -$$;( Phili//in0 N"2ion"l B"n3 v . CA, ,%. SCRA 7$-( In20!n"2ion"l Co!/o!"20 B"n3 v . CA, ;% S0/205)0! ,;;.( A oci"20d B"n3 v . CA, +"nu"!6 #-, -$$.( +"i=Al"i v . BPI, .. SCRA ,$( R0/u)lic v . E)!"d", +ul6 #-, -$'%( Phili//in0 N"2ion"l B"n3 v . Dui5/o, M"!ch -7, -$&&( G05/0 "@ v . CA, 10)!u"!6 $, -$$#( Phili//in0 Co550!ci"l In20!n"2ion"l B"n3 v . Cou!2 o< A//0"l , #%; SCRA 77.( MWSS v . CA, -7# SCRA ,;( Ilu o!io v . CA, #$# SCRA &$( S"5 un9 Con 2!uc2ion v . 1"! E" 2 B"n3, -% Au9u 2 ,;;7( M02!o)"n3 v . C")il:o, ;. D0c05)0! ,;;.( B"n3 o< A50!ic" v . Phili//in0 R"cin9 Clu), G.R. No. -%;,,&, +ul6 ,;, ,;;$

EN1ORCEMENT O1 LIABILITY
1. 2. =arties pri!arily lia le an' parties secon'arily lia le General steps in enforcing lia ility a. pro!issory notes *1present!ent for pay!ent *1ec. .8+ )2/-

*2notice of 'ishonor *1ec. 54+ )2/ills of e#change *1present!ent for acceptance *1ec. 1$"+ )2/*ahow !a'e *1ec. 1"2-1"& ; 1".+ )2/* ti!e to accept *1ec. 1"(+ )2/*crule when inco!plete ill is accepte' *1ec. 1"5+ )2/*',in's of acceptance *1ec. 1"4-1$2+ )2/*2if 'ishonore' y non-acceptance7 *anotice of 'ishonor *1ec. 54+ )2/* rule in case of foreign ills *1ee provisions on protest*"2f accepte'7 *apresent!ent for pay!ent to acceptor * rule if 'ishonore' upon present!ent for pay!ent *crule in case of foreign ill

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=resent!ent for pay!ent a. Concept of present!ent . Re0uisites for sufficiency *1ec. .2+ )2/*1'ate of present!ent *1ec. .1+ )2/*arule in 'eter!ining !aturity 'ate *1ec. 5&+ )2/* rule in co!puting ti!e *1ec. 5(+ )2/*crule if paya le at a an, *1ec. .&+ )2/*2place of present!ent *1ec. ." )2/*arule if paya le at a special place *1ec. .8+ )2/*"present!ent to the party pri!arily lia le *ahow present!ent !a'e *1ec. .$+ )2/* rule in case party pri!arily lia le is alrea'y 'ea' *1ec. .(+ )2/*cpresent!ent to partners *1ec. ..+ )2/*'present!ent to 6oint 'e tors *1ec. .5+ )2/c. '. 2nstances where present!ent is e#cuse' *1ec. .4 ; 52+ )2/:hen 'elay in present!ent e#cuse' *1ec. 51+ )2/-

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)otice of 'ishonor a. when 'ishonor of the instru!ent occurs7 *1'ishonor y non-pay!ent *1ec. 5"+ )2/*2'ishonor y non-acceptance *1ec. 1$4+ )2/c. who shoul' give notice *1hol'er *2agent *"party who !ay e co!pelle' to pay '. for! of notice *1ec. $" ; $$+ )2/e. to who! notice is given *1party secon'arily lia le or agent *1ec. 4.+ )2/*2notice where party is 'ea' *1ec. 45+ )2/*"notice to partners *1ec. 44+ )2/*$notice to persons 6ointly lia le *1ec. 188+ )2/*&notice to an,rupt *1ec. 181+ )2/f. g. h. ti!e an' place of notice *1ec. 18"-185+ )2/when notice is e#cuse' or unnecessary *1ec. 184-112+ 11$-11&+ )2/when 'elay in giving notice e#cuse' *1ec. 11"+ )2/-

CASES: 1"! E" 2 R0"l26 Inv0 250n2, Inc. v . CA, -.. SCRA ,%.( Won9 v . CA, 10)!u"!6 ,, ,;;-( In20!n"2ion"l Co!/o!"20 B"n3 v . S/ . Gu0co, 10)!u"!6 -,, ,;;-( 1"! E" 2 R0"l26 v . CA, Oc2o)0! %, -$&&( S2"20 Inv0 250n2 >ou 0 v . CA, ,-' SCRA #,( A i" B"n3in9 Co!/o!"2ion v . +"vi0!, 77 Phil '''( N6co S"l0 Co!/o!"2ion v . BA 1in"nc0 Co!/o!"2ion, ,;; SCRA .#'( A!c0o, +!. v . P0o/l0 o< 2h0 Phili//in0 , G.R. No. -7,.7-, -' +ul6 ,;;.( Alli0d B"n3in9 v . CA, GG S/o!2 @0"!, -- +ul6 ,;;.

DISC>ARGE O1 INSTRUMENTS
1. 2. Concept of 'ischarge <ow instru!ent is 'ischarge' *1ec. 114+ )2/a. pay!ent in 'ue course *1ec. 55+ )2/*1y the principal 'e tor *1ec. 114 CaD*2y the acco!!o'ate' party *1ec. 114C D. intentional cancellation *1rule in case of unintentional cancellation *1ec. 12"+ )2/c. any act that 'ischarge si!ple contracts '. principal 'e tor eco!es a hol'er ?ischarge of persons secon'arily lia le *1ec. 128+ )2/-

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C>ECES
1. 2. ". $. Chec,s 'efine' *1ec. 15&+ )2/?istinguishe' fro! 'raft Relationship etween 'rawer+ 'rawee an' payee Ein's of chec, a. cashier3s an' !anager3s chec, *1ee B1= Circulars 2&4+ series of 2888 ; 241+ series of 2881. certifie' chec, *1ec. 15.-154+ )2/c. crosse' chec, *Art. &$1+ Co'e of Co!!erce*1effects of crossing a chec, '. !e!oran'u! an' traveller3s chec, when re0uire' to e presente' for pay!ent *1ec. 15&+ )2/effect of 'eath of 'rawer pertinent =hilippine Clearing <ouse Corporation rules

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CASES: N0@ P"ci<ic Ti5)0! v . >on. S0n0!i , D0c05)0! -$, -$&;( PNB v . N"2ion"l Ci26 B"n3 o< N0@ Yo!3, .# Phil '--( B"2""n Ci9"! v . CA, ,#; SCRA .7&( S20lco M"!302in9 Co!/o!"2ion v . CA, +un0 -', -$$,( S2"20 Inv0 250n2 >ou 0 v . CA, -'% SCRA #--( P"/" v . A.U. A"l0nci", ,&7 SCRA .7#( Aill"nu0v" v . Ni20, G.R. No. -7&,--, ,% +ul6 ,;;.( EFui2")l0 PCI v . On9, -% S0/205)0! ,;;.( S0cu!i26 B"n3 4 T!u 2 Co5/"n6 v . RCBC, G.R. No . -';$&7 4 -';$&', +"nu"!6 #;, ,;;$