Bar Questions in Negotiable Instrument

Summary of Bar Examination Cases MERCANTILE LAW REVIEW Negotiable Instruments Law

GENERAL PRINCIPLES A. THEORY 01. What are the requisites of a negotiable instruments? [1953, 1954, 1964, 1968, 1989, 1991, 1996, Bar Examinations]. 02. What constitutes a holder in due course? [1996, Bar Examinations]. 03. Can a bill of exchange or a promissory note qualify as a negotiable instrument if a.It is not dated; or b.The date and the month, but not the year of its maturity is given; or c.It is payable to cash; or d.It names two alternative drawees [1997, Bar Examinations]. 04. A promissory note reads as follows: “I promise to pay Gabriela Silangan P1,000.00 three years after the unconditional withdrawal of the U.S. of its military bases in the Philippines.” Discuss the negotiability or non-negotiability of the note above [1966 Bar Examinations]. 05. Can the payee in a promissory note be a ‘holder in due course’ within the meaning of the Negotiable Instruments Law? [2000 Bar Examinations]. 06. How do you treat a negotiable instrument that is so ambiguous that there is a doubt whether it is a bill or a note? [1999, Bar Examinations]. 07. When a signature is so placed upon a negotiable instrument that it is not clear in what capacity the person making the same intended to sign, what is his liability? [1946, Bar Examinations]. 08. When a negotiable instrument contains the words “I promise to pay” and is signed by two or more persons, what is their liability, joint or solidary? Explain [1946, Bar Examinations].

B. TESTS OF NEGOTIABILITY 09. MP bought a used cellphone from JR. JR preferred cash but MP is a friend so JR accepted MP’s promissory note for P10,000.00. JR though of converting the note into cash by indorsing it to his brother KR. The promissory note is a piece of paper with the following hand-printed notation: “MP WILL PAY JR P10,000.00 IN PAYMENT FOR

October 5.000. 10. .00) which I promise to pay on demand or in five months from date with one percent interest per month payable within the first five days of every month. payable in equal installments of P20. Does Romeo have a right of action against the bank? Explain [1986 Bar Examination]. indicating the date of the promissory note. Which of the opposing views is correct? Explain [2000 Bar Examinations]. Is the above promissory note a negotiable instrument? Explain [1992 Bar Examinations]. Romeo learned that his enemy had hired a contract killer to liquidate him. SGD Perla Manila.000. the latter said it was not a negotiable instrument under the law and so could not be a valid cash substitute.000.HIS CELLPHONE ONE WEEK FROM TODAY”. JR took the opposite view. Perla bought a motor car payable in installments from Automotic Company for P250.00 Manila. She executed a promissory note for the balance which reads: For value received. 1970 I acknowledge to have received from Jose Cruz one thousand pesos (P1.000. he mailed to his fiance. 11.00 with interest at 12% per annum.00 in his current account at Matatag Banking Corporation. 12. Juliet presented the check for payment but the bank refused to honor it. Fearful of his life. I promise to pay Automotive Company or order at its office in Legaspi City. Juliet.00 with a P50. When JR presented MP’s note to KR.000. The check was payable to Juliet or order and was accompanied by a letter stating that he was giving her his money out of his great love for her and because something would happen to him anytime now. You are asked to referee .000. Below this notation is MP’s signature with “8/1/00 next to it. then both principal and interest shall become due at the option of the holder. Juliet broke off her engagement with Romeo. the sum of P200. If the interest is not paid when due. Explain whether or not the following instrument is negotiable. Perla defaulted in the payment of her installments.00 downpayment. insisting on the note’s negotiability. Does Juliet have any right of action against the bank? Because of the humiliation she suffered from the bank. a check for his P100.000.00 in the bank. P1. Romeo had P100.00 for ten (10) months starting 21 October 2002. 21 September 2002 Automotive Company subsequently indorsed the note to Reliable Finance Corporation which financed the purchase.000.

Imelda negotiated the check to MT Investment which paid the amount of P40. Eva withdrew her funds from the drawee bank. In payment of canned goods he had purchased. the drawee bank dishonored it. On September 15. He sent the check “without recourse” to Juan Santos.00 with interest at 12% per annum on or before .000. Gomez presented the check to the bank.000. The canned goods were never forwarded to Flores. Pedro Flores of Cabanatuan drew a check upon PNB for P1. X executed a promissory note in favor of Y for P10. by delivery to Antonio Gomez.. For value received. when MT Investment sued her. to Pablo Reyes. Eva issued to Imelda a check in the amount of P50. 15.00. when MT Investment presented the check for payment. Eva failed to sell the ring. may he recover from the latter? May Gomez recover from Santos? Why? May he recover from Reyes? Why? [1968 Bar Examination].000. Eva raised the defense of absence of consideration. DEFENSES C. 16. Is the bank right in so refusing? Why? If Gomez gave due notice to Veraz and Co. who..000. the check having been issued merely as security for the ring that she could not sell. but payment was refused because Reyes had not put his name on it. FAILURE/ABSENCE OF CONSIDERATION 14. Can Y collect interest on the note? Why? Explain [1964 Bar Examination]. Unable to retrieve her check.SGD: Pedro Garcia [1970 Bar Examination].000. The latter indorsed it in blank. Thus.00 post-dated September 19.00 payable to the order of Veraz and Co. in turn.00 to her. for consideration. A and B executed and delivered to C a promissory note which reads: “I promise to pay C or bearer the sum of P2. Bar Examination]. as security for a diamond ring to be sold on commission.00 agreeing to pay interest thereon but without specifying the rate thereof. Does Eva have a valid defense? Explain [1996. so she returned it to Imelda on September 19. Later on. sold it for P800. the seller in Manila. 13.

May Vilma be held liable? Explain [1996 Bar Examination]. Nora applied for a loan of P100. executed a promissory note in favor of BUR Bank. saying that he indorsed merely as a friend. 1969. and the costs.00 payable to the order of X who in turn negotiates it to Y. She negotiated the note to Julie who had knowledge of the infirmity. BUR Bank sued Vilma. and on April 15. 1960. INCOMPLETE DELIVERED INSTRUMENT 20. Two months later.00. negotiated said note to Devi for value and who had no knowledge of the infirmity. SGD A and B. Vilma. in turn. with 12% interest per annum from February 1. The next day.June 30. Payment was refused for lack of funds. May Y recover from Pedro if the latter imterposes absence of consideration? Supposing under the same facts. D. accepted it. knowing that Reyes had not received any value for indorsing the check.000. Reyes indorsed Santos’ check and Vera.00 in violation of the instruction. By way of accommodation.000. However. Nora’s sister. Not having enough cash on hand. without consideration. C delivered to D the aforesaid note with the indorsement: “Pay to D”. their mutual friend. may he recover the same amount from X? Explain [1998 Bar Examination]. Pedro pays the said P20. X filed an action to collect from A the total amount of the promissory note.00. for value received. Julie. 17. his liability cannot exceed more than one-half of the amount due.00 with BUR Bank. the said note was indorsed in blank by D and delivered to X. despite its knowledge that Vilma received no part of the loan.000. Vera refused to accept the check unless it is indorsed by Reyes. Larry issued a negotiable promissory note to Evelyn and authorized the latter to fill up the amount in blank with his loan account in the sum of P1. Is Reyes liable to Vera? In the event Reyes voluntarily pays Vera. Upon A’s refusal to pay despite demand. Vera presented the check to the drawee bank for payment. February 1. Santos offered to pay in check.00. Manila. [1969 Bar Examination].000. Can Devi enforce the note . Santos purchased Vera’s car for P50. When Nora defaulted. 1969. Evelyn inserted P5. the latter knowing that Pedro is not a party for value. Are A’s defenses valid? Is X entitled to the whole amount of the note? Explain. 19. Vera gave notice of dishonor to Reyes. Pedro makes a note for P20. does Reyes have the right to recover from Santos? Explain [1985 Bar Examination]. 18.000. A’s defenses are that the note is null and void because the same was issued to pay a gambling debt and that in any event. For the purpose of lending his name without receiving value therefor. but Reyes refused to pay. 1969.000.

contending that he did not authorize its completion and delivery. But X said he had no participation in. signed by him. had endorsed the note after inserting his own name in the blank space as the payee.00.000. If you were Jose and Adriano presented to you the note for payment. He mindlessly left the note on top of his desk at the end of the workday.00. PN makes a promissory note for P5. the pilferage and alteration of the note and therefore he enjoys the rights of a holder in due course under the Negotiable Instruments Law. However. In breach of trust. A entrusted to B. Later.against Larry. a holder in due course. B filled up the check by writing the name of E. for how much? Supposing Devi indorses the note to Baby for value but who has knowledge of the infirmity. A learned of the misdeed of B and issued a stop-payment order to X bank as a result of which X bank refused to honor the check presented to it by E. left the check on top of his executive desk in his office.00 and negotiated the note to Pepe. 25. Marina fills up the note for P20. Before X. can the latter enforce the note against Larry? Explain [1993 Bar Examination]. Nazareno forced the door to Reyes’ office and stole the blank check. 23. what defense or defenses are you going to interpose to negate liability on the instrument? Explain [1981 Bar Examinations]. 24.00 on the check and delivered the same to E. Jose Reyes signed a blank check.000.000. E.000. with instructions to fill up the check in favor of D for the amount of P1. or knowledge about. For what amounts are Maria and Pilar liable to Pepe? Explain [1972 Bar Examinations]. Maria issued a negotiable promissory note and authorized Pilar to fill-up the amount in blank up to P2. Who is correct and why? [2000 Bar Examination]. 21. PN dishonored the note. Jose makes a negotiable note payable to bearer with the amount in blank and delivers it to Karen for safekeeping. Before E could encash the check.00 and negotiates it to Adriano. INCOMPLETE UNDELIVERED INSTRUMENT 22. his secretary. Nazareno immediately filled in the amount of . who turned out to have filched the note from PN’s office. a blank check drawn on X bank. and in his hasted to attend a party. Pilar filled it up to P4. and if she can.000.00 and to thereafter deliver the said check to D. who accepted it in payment of certain goods sold by E to B. but leaves the name of the payee in blank because he wanted to verify its correct spelling first. T. It turned up later when X presented it to PN for payment.000. and the amount of P2. When he returned the following morning. Can E now hold X bank and A liable? Reason [1971 Bar Examinations]. the note was missing.

C and D liable secondarily on the instrument? [1997 Bar Examinations]. Juan makes a promissory note payable to the order of Pedro. what will be your answer? Can F enforce the instrument against B? Against C. and C later indorses it in blank to D. B then specially indorses it to C. Nazareno then endorsed the check in the payee’s name and passed it to Roldan. finding the note. the holder. Juan makes a promissory note payable to his order. 28. B then endorsed the check in the payee’s name and passed the check to C. a holder in due course. Roldan endorsed the check to Dantes. Can F enforce the instrument against A? Suppose that F is a holder in due course. for any reason. A signed a blank check which he inadvertently left at his desk at his Escolta Office. Explain briefly [1981 Bar Examinations].00 and a fictitious name as payee. may Carlos hold Juan and Jose liable on their respective indorsements? Reason out your answers [1989 Bar Examinations]. A delivers a bearer instrument to B. Thereafter. . who. Can Dantes enforce the check against Jose Reyes? If Dantes is a holder in due course. can F hold any of B. which was stolen by X. C places the note in his wallet. The same was later stolen by B. If. Give reasons [1978 Bar Examinations]. Somehow. in turn. then D to E.300. F. A makes a negotiable promissory note payable to B or bearer. and E to F.P50. who in turn. forging the signature of Jose. B indorses the note to C.00 and a fictitious name as payee on the said check. Roberto obtains possession of the note and. FORGERY 27. signing Pedro’s name thereon as maker without Pedro’s knowledge and consent. A delivers the note to B. who. E steals the instrument from D and. B and C to F. May Carlos enforce the note against Pedro? And if the note is dishonored by Pedro. the drawee bank refuses to honor the check. delivers the note to F. 30. will your answer be the same? [1985 Bar Examinations]. indorses it to Amado. who filled in the amount of P22. thereafter C passed it to D. forging the signature of D. D indorses the note to E. 26. What are the liabilities of A. indorses it to D by forcing C’s signature. without indorsement. Amado then indorses the note to Nilo. 29. can F enforce the instrument against the drawer? In case of the dishonor of the check by both the drawee and the drawer. Juan then indorses the note to Jose. succeeds in “negotiating” it to F who acquires the instrument in good faith and for value. indorses it to Carlos under circumstances which make Carlos a holder in due course. who indorses it to Jose.000. State the rights and liabilities of the parties [1984 Bar Examinations].

00 was drawn against drawee bank and made payable to XYZ Marketing or order. did not detect the forgery and paid the amount. A transfers the note to C who pays P5. Who may properly be charged with the amount of the check? Explain your answer [1961 Bar Examinations]. a holder in due course. for value. it was stolen by C who succeeded in negotiating the same to D. MATERIAL ALTERATION 35. the drawee bank. The latter somehow misplaces the said note and Carlos Ros finds the note lying around the corridor of the building. 34. The Bank of Philippine Islands.000.000. the check was complete in all respects. for the amount of the note? What defense/defenses can B interpose? Explain [1978 Bar Examinations]. Juan de la Cruz signs a promissory note payable to Pedro Lim or bearer. the maker of the note. XYZ Marketing sued drawee bank. Going further. Can C file an action successfully against B. FRAUD 33. B refused to have the amount of the check deducted from his bank deposit. G. Carlos Ros endorses the promissory note to Juana Bond. manager of a Trading Company. as the drawer of a check. by forging the signature of Pedro Lim. May the bank charge the amount paid against the account of the alleged drawer? Explain [1977 Bar Examinations]. A induces B by fraud to make a promissory note payable on demand to the order of A in the sum of P5. Drawee bank refused to honor the check on the ground that the serial number thereof had been altered. At the time of signing. but that night. The check was deposited with payee’s account at ABC Bank which then sent the check for clearing to drawee bank. A succeeded in making B affix his signature on a check without B’s knowing that it was a check. 32.00. H. A intended to cash the check the following morning. D cashed the check the following morning. Is it proper for the drawee bank to dishonor the check for the .31. Can A file an action successfully against the maker B for the amount of the note? Reasons. A check for P50. May Juana Bond hold Juan de la Cruz liable on the note? Explain [1980 Bar Examinations].000. Fernando forged the name of Daniel.00 therefor and acquires the note under circumstances that make him (C) as holder in due course. and delivers it personally to Pedro Lim.

For what amount are Maria and Pilar liable to Pepe? . Albert altered the amount of the check to P210. demanded recredit from PNB which cannot now locate B.00 to William’s current account and sought reimbursement from ND Bank. In consideration of some goods he bought. Is this contention correct? Explain [1999 Bar Examinations]. Maria issued a negotiable promissory note and authorized Pilar to fill up the amount in blank up to P2.00 without the knowledge of A. However. Drawee theorized that there was no basis to make it liable for the check. A issued to B a personal check in the amount of P280. 37. did not notice the alteration and the check therefore cleared. should bear the loss? Explain [1996 Bar Examinations].000. He immediately notified BPI and demanded a recredit. drawee bank contended that XYZ Marketing as payee could not sue the drawee bank as there was no privity between them. he noticed the discrepancy in the amount when he compared the altered check with his check stub. XM Bank recredited P210. When ND Bank presented the check for payment through the Clearing House. William discovered the alteration.00 and closed his account. B then deposited the altered check in his account with PNB. he lodged a complaint at the Bank of America. Juan deposits the check at Citibank and after clearing. Thereafter. Who. who debited the amount to Pedro. Upon discovery by Pedro of the material alteration. XM Bank honored it.000. which released it for clearing. When A received his bank statement and cancelled checks. how much? Can PNB be compelled to reimburse BPI of the amount the latter may have recredit to the account of A? Explain [1986 Bar Examinations].000.00 in favor of Jose or order against his current account with the Bank of America. he closed his account. erases the name of Jose and superimposes his own name.000. The BPI. When the check was returned to him after a month. Bank of America demands reimbursement for Citibank which refuses on the ground that it only acted as an agent for collection.00 and deposited the check to his account with ND Bank.00. Pedro writes out a check for P1. 36.00 and negotiated the note to Pepe. Pilar filled it up to P4. The alteration is not apparent to the naked eye. Juan withdraws the amount and absconds.00 which B altered to P2. 39. claiming that XM Bank failed to return the altered check within the 24 hour clearing period.000. Albert withdrew the amount of P210. BPI.800.000.800. Can A compel BPI to recredit his account? If so. in turn.000. 38.00 only. ND Bank refused.00 drawn on XM Bank. Juan steals the check.reason that it had been altered? In instant suit. as between XM Bank and ND Bank. Who bears the loss? Why? [1977 Bar Examinations]. the drawee bank. B was able to withdraw the P2. after which. William issued to Albert a check for P10.

not knowing of the alteration which was neatly done. to help him buy school books. A indorses the note to B. the bank honors the check when it was presented to payment. I.00 and presented the bill to the drawee for acceptance. WARRANTIES/LIABILITIES J. A executed a bill of exchange for P500. accepted the bill. K. can X set up the defense of minority and lack of consideration? Explain [1989 Bar Examinations]. makes a promissory note for P500. what are the possible defenses to be interposed by X? If C sues X on the note.000. a minor. C knows A’s minority. The drawee. and if so.00. Anna makes a promissory note payable to bearer and delivers it to Bing. Is the drawee’s contention tenable? Can the drawee debit the amount of A.000. in turn. who in turn endorses the note to C. If C sues X on the note. . NEGOTIATOR BY DELIVERY 44. who. 40. If C presents the note to X for payment. who now seeks to hold the drawee liable for P5. who altered the amount to P5. The bank files an action for recovery of the amount paid to B because the check presented has no sufficient funds. without receiving consideration therefor. can X set up the defenses of minority and lack of consideration? Explain [1998 Bar Examinations]. ACCEPTOR 43. In turn.Explain [1972 Bar Examinations]. a minor. Apparently. X has conspired with the bank’s bookkeeper so that his ledger card would show that he still has sufficient funds.000. X makes a promissory note for P10. A endorses the note to B for value. 42. The drawee contends that under the rule on alteration. X draws a check against his current account with Ortigas Branch of Bonifacio Bank in favor of B. he can only be liable up to P500. C knows A is a minor.00 in favor of B.00 payable to A.00. Although X does not have sufficient funds. to help him to buy school books. Thereafter. MINORITY 41. indorses the note to C. N negotiated the bill to C.00 payable to A. to what extent? Reasons [1971 Bar Examinations]. X. Decide the case [1998 Bar Examinations].

Benito indorsed the PN to Celso in payment of an existing obligation. without actual knowledge of the loss.00 on B. L. a money lender who did not make inquiries about the PN. 48. transfers and delivers the same to Napoleon. the Bank payable to the order of C and delivered the check to the latter for value. D now sues the bank. A gave to B his check drawn on PNB. On November 3. May Napoleon proceed against Richard Clinton for the note? [1998 Bar Examinations].Bing negotiates it by mere delivery to Carmen. in payment of merchandise sold to a stranger whom he thought owned the check.000. The latter. INCIDENTS M. At D’s request. A drew a check for P1. While in Celso’s possession. When Felix demanded payment of the PN from Alex. if any. What are the rights of Felix. Richard Clinton makes a promissory note payable to bearer and deliverrs the same to Autora Page. without endorsing the promissory note. Later. A ordered payment stopped by notifying B. X. On November 10. Edgar indorsed the PN to Felix. Signed: Aurora Page”. The stop payment order was overlooked and the check was paid to E. Decide the case with brief reasons [1979 Bar Examinations]. the latter refused to pay. however. who negotiates it to Fe by mere delivery. Anna did not pay. Dennis could no longer be located. C could not encash the check because the Bangko Sentral had forbidden PNB to do business on . a holder in due course. INDORSERS 45. Manila. the PN was stolen by Dennis who forged Celso’s signature and discounted it with Edgar. who lost it. Does Celso have any right of action against Alex. Alex found the goods to be defective. Dong negotiates it by special indorsement to Emma. Celso and Edgar? Explain. endorses it to X in this manner: “Payable to X. NEGOTIATION 47. Benito and Felix? Explain [1995 Bar Examinations]. To whom are Bing and Carmen liable? To whom are Dong and Emma liable? Explain [1988 Bar Examinations]. C indorsed the check in blank and negotiated it to D. against Alex. who had taken the check. who indorses it specially to Dong. 46. The note is subsequently dishonored by Richard Clinton. Benito. Later. B thereafter negotiated the check to C. Alex issued a negotiable promissory note (PN) payable to Benito or order in payment of certain goods. as payment for goods received.

50. C to D.000. W indorses the instrument to P on September 1 and on September 15 presents it for acceptance. the holder. . Will the case prosper? Give reasons for your answer [1963 Bar Examinations]. 2002. Bar Examinations].00. May E immediately proceed against B.) A”. N. A issued a promissory note to B dated January 1.grounds of insolvency. DISHONOR 49. if any. The bill is dishonored. C or D? What should C do to protect his rights. the latter refused to pay. against A. X draws a bill of exchange against Y in favor of W for P1. When is notice of dishonor not required to be given to the drawer? [1996. When E presented the note for payment to A. 51. P promptly sues W for payment.00 sixty days after date. 1962. (Sgd. Can C hold A liable on the uncashed check? Can C hold B liable instead on the uncashed check? Explain. B and D? Explain [1984 Bar Examinations]. If you were B. E then gave a notice of dishonor to C only. in the following tenor: “I promise to pay to the order of B P1. requesting the drawee to pay on December 24. The note was subsequently negotiated with proper indorsement by B to C. and D to E. how would you negotiate the check to negate future liability thereon? Explain [1987 Bar Examinations].000.

Sign up to vote on this title
UsefulNot useful