NEGOTIABLE INSTRUMENTS NOTES

BASED ON AGBAYANIS BOOK AND ATTY. MERCADOS LECTURES

Page 86 of 190


BY: MA. ANGELA LEONOR C. AGUINALDO
ATENEO LAW 2D BATCH 2010
1. Acceptor consequently precluded from setting up the defense that
the drawer is non-existent or fictitious because of his admission of
the drawers existence
2. Neither can he claim the drawers signature is a forgery because
he admits the genuineness of the drawers signature
3. Neither can the drawee escape liability by alleging want of
consideration between him and the drawer as by accepting the
bill, he admits the capacity and authority of the drawer to draw
the bill

CASE DIGESTS: SECTION 62

115 FOSSUM V. FERNANDEZ
64 PHIL 675

FACTS:
Fernandez Hermanos placed an order with the products company for the
manufacturing of a chain given a set of specifications. The chain was duly
prepared and delivered. A draft was drawn by the company and was
accepted by Fernandez Hermanos. Thereafter, the draft was negotiated
with Fossum who demanded payment on the instrument but was refused
by Fernandez on alleged failure of the chain delivered to satisfy the
specifications given.

HELD:
It devolved around Fernandez Hermanos to allege and prove its claim that
which was delivered and received didn't comply with the specifications and
didn't answer the purposes for which it was intended. It alleged that the
chain didn't meet the specifications given by the contract. Nonetheless,
there was failure to identify the so-called defects of the chain. It was upon
Fernandez Hermanos to show that indeed the chain was defective. But as
the trial court found out, there was a failure of proof.

**Fernandez Hermanos accepted the instrument and thus, made certain
warranties regarding the same. These warranties have many effects and
one of it is being precluded from raising the defense of want of
consideration. In case he raises the said defense, he should be able to
present evidence to support such allegation. Failure to do so would make
the presumption still subsisting.

116 PNB V. CA
25 SCRA 693

FACTS:
Lim deposited in his PCIB account a GSIS check drawn against PNB.
Following standard banking procedures, the check was sent to petitioner
for clearing. He didnt return said check but paid the amount to PCIB as
well as debited it against the account of GSIS. Thereafter, a demand was
received from GSIS asking for the credit of the amount since the
signatures found in the check were forged. This was done by PNB and it
now comes after PCIB but the latter wouldnt want to return the money.

HELD:
Acceptance is not required for checks, for the same are payable on
demand. Acceptance and payment are distinguished with each other. The
former pertains to a promise to perform an act while the latter is the actual
performance of the act.

PNB had also been negligent with the particularity that it had been guilty of
a greater degree of negligence because it had a previous and formal notice
from GSIS that the check had been lost, with the request that payment be
stopped. Just as important is that it is its acts, which are the proximate
cause of the loss.

117 PNB V. NATIONAL CITY BANK
63 PHIL 711

FACTS:
Unknown persons negotiated with Motor Services Company checks, which
were part of the stipulation in payment of automobile tires purchased from
the latters store. It purported to have been issued by Pangasinan
Transportation Company. The said checks were indorsed at the back by
said unknown persons, the Motor company believing at that time that the
signatures contained therein were genuine. The checks were later
deposited with the companys account in National City Bank of NY. The
said checks were consequently cleared and PNB credited National City Bank
with the amounts. Thereafter, PNB discovered that the signatures were
forged and it demanded the reimbursement of the amounts for which it
credited the other bank.

HELD:
A check is a bill of exchange payable on demand and only the rules
governing bills of exchanges payable on demand are applicable to it. in
view of the fact that acceptance is a step necessary insofar as negotiable
instruments are concerned, it follows that the provisions relative to
acceptance are without application to checks. Acceptance impies
subsequent negotiation of the instrument, which is not true in the case of
checks because from the moment it is paid, it is withdrawn from