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NEGOTIABLE INSTRUMENTS NOTES

BASED ON AGBAYANIS BOOK AND ATTY. MERCADOS LECTURES


Page 85 of 190


BY: MA. ANGELA LEONOR C. AGUINALDO
ATENEO LAW 2D BATCH 2010
On whether or not Banco Atlantico was a holder in due course, it is not.
Following the decision of the Auditor General in denying the claim of the
bank, the checks were demand notes. It should have been put on guard
when Boncan negotiated the checks with them and subsequently deposited
the same to her account. Even though it were demand notes, she
instructed the bank that the same be not presented for collection till a later
date. The fact that the amount was quite big and it was the payee herself
who made the request that the same be not presented for collection until a
fixed date in the future was proof of a glaring infirmity or defect in the
instrument. It loudly proclaims Take me at your own risk. It was
obvious by then that the bank had knowledge of the infirmity or defect of
the checks. Furthermore, what it did when it allowed payment before
clearing is beyond the normal and ordinary banking practice especially
when the bank involved is a foreign bank and the amounts involved were
large. Boncan wasn't even a client of the bank but was someone who had
special relations with its officers.

In view of the foregoing, the embassy as the drawer of the 3 checks in
question cannot be held liable. It is apparent that the said 3 checks were
(fraudulently altered) by Boncan as to their accounts and therefore wholly
inoperative (note: should be avoided).

Sec. 62. Liability of acceptor. - The acceptor, by accepting the
instrument, engages that he will pay it according to the tenor of his
acceptance and admits:

(a) The existence of the drawer, the genuineness of his
signature, and his capacity and authority to draw the instrument;
and

(b) The existence of the payee and his then capacity to indorse.

ACCEPTOR PRIMARILY LIABLE
Acceptor engages to pay absolutely according to the tenor of its
acceptance
His liability is not subject to any condition
The acceptor is the drawee who accepts the bill
His acceptance immediately places a legal liability on him for the
payment of the bill in favor of one who became a holder thereof after
acceptance, and if he wants to escape liability, it is up to him to show
that he is a mere agent of the drawer, or allege and prove any other
defense which he has to the liability

EFFECT OF MORTGAGE EXECUTED BY ACCEPTOR
Where being unable to pay certain bills of exchange which the drawee
has accepted, the latter makes a mortgage in favor of the holder of
said bills upon certain merchandise the value of which is sought to be
collected through said bills, in order to secure the payment of said
amount if the merchandise is sold and the integrity thereof while the
sale is not effected, the execution of said mortgage doesnt constitute
a Novation of the obligation represented by said accepted bills unless it
is expressly stated in the mortgage

ACCEPTOR TO PAY ACCORDING TO TENOR OF HIS ACCEPTANCE
While the maker of a note engages to pay according to the tenor of the
note, an acceptor engages to pay according to the tenor of his
acceptance, not of the bill he accepts
Tenor of his acceptance may be different from the tenor of the bill, as
the acceptor may accept the bill with qualifications
If his acceptance is general, the tenor of then bill is the same tenor as
the tenor of his acceptance

WHERE ORIGINAL TENOR IS ALTERED BEFORE ACCEPTANCE
Suppose the bill is originally for P1000. Before the drawee X accepts
it, it is altered by the payee B to P4000. Then X accepts it. How much
is X liable to a holder in due course?
According to one view, X is liable for P4000 and not P1000. The
reason is that the tenor of Xs acceptance is for P4000.

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 Xs standpoint. In
other words, the original tenor of the instrument is P4000, which is the
tenor of Xs acceptance.
If after his acceptance, a subsequent indorsee alters the bill to read
P9000, then X could be liable for P4000 only, the original tenor of his
acceptance, even as to a holder of due course.

ADMISSION OF DRAWERS EXISTENCE, ETC.
Drawers existence
The genuineness of the drawers signature
The capacity and authority of the drawer to draw the instrument
He doesnt admit the genuineness of the indorsers signatures

EFFECT OF ACCEPTORS ADMISSIONS