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TABLE OF CONTENTS
INTRODUCTION ............................................................................................................................................................................................ 1
1. Kinds of negotiable instruments ...................................................................................................................................................... 1
2. Parties and the nature of their liability ............................................................................................................................................. 1
3. Functions of negotiable instruments ............................................................................................................................................... 1
4. The concept of negotiability ............................................................................................................................................................ 1
5. The origin of negotiable instruments .............................................................................................................................................. 2
6. History of the Negotiable Instruments Law ..................................................................................................................................... 2
7. Applicability of the Negotiable Instruments Law ............................................................................................................................ 2
Sec. 196, NIL. Cases not provided for in Act. ................................................................................................................................... 2

CHAPTER 1 – REQUISITES OF NEGOTIABILITY ............................................................................................................................................. 2
Sec. 1. Form of Negotiable Instruments. ......................................................................................................................................... 2
Sec. 184. Promissory Note Defined. ................................................................................................................................................ 2
Sec. 126. Bill of Exchange Defined. ................................................................................................................................................. 2
1. Written form and signature ............................................................................................................................................................ 2
Sec. 18. Liability of Person Signing in Trade or Assumed Name. ..................................................................................................... 2
Sec. 19. Signature by Agent; Authority; How Shown. ...................................................................................................................... 2
2. Unconditional order or promise to pay............................................................................................................................................ 3
a. When unconditional ................................................................................................................................................................... 3
Sec. 3. When Promise is Unconditional. .......................................................................................................................................... 3
Powell & Powell v Greenleaf & Currier ........................................................................................................................................ 3
Irving Trust Co. v Leff ................................................................................................................................................................. 4
3. Sum payable must be certain ......................................................................................................................................................... 4
Sec. 2. Certainty as to Sum; What Constitutes. ............................................................................................................................... 4
4. Payable in money ........................................................................................................................................................................... 5
Incitti v Ferrante, et al. ............................................................................................................................................................... 5
5. Certainty of time of payment .......................................................................................................................................................... 5
a. When payable on demand ......................................................................................................................................................... 6
Sec. 7. When Payable on Demand. ................................................................................................................................................. 6
b. Payable at a fixed time ............................................................................................................................................................... 6
c. Payable at a determinable future time ....................................................................................................................................... 6
Sec. 4. Determinable Future Time; What Constitutes. .................................................................................................................... 6
Sec. 11. Date, Presumption As To. ................................................................................................................................................... 6
Sec. 17. Construction Where Instrument is Ambiguous. .................................................................................................................. 6
d. Effect of acceleration provisions ................................................................................................................................................. 6
Rehabilitation Finance Corporation v CA, Estelito Madrid and Jesus Anduiza ............................................................................ 6
Utah State National Bank v Smith et al. ......................................................................................................................................7
Puget Sound State Bank v Washington Paving Co. .....................................................................................................................7
Henry v Madison Aerie No. 623, Fraternal Order of Eagles of Madison, Wisc, et al. .....................................................................7
e. Provisions extending the time of payment.................................................................................................................................. 8
State Bank of Halstad v Bilstad .................................................................................................................................................. 8
Security National Bank of Sioux City, Iowa v Gunderson ............................................................................................................. 8
6. Must be payable to order or bearer ................................................................................................................................................. 9
a. When the instrument is payable to order.................................................................................................................................... 9
Sec. 8. When Payable to Order. ...................................................................................................................................................... 9

............... Particular Money....................... How indorsement made ........................... Kinds of indorsements ........................................................ When Payable to Bearer ................................................................................................................. 15 Sec.................................. Delivery and issuance .......... 17 c. How Made............... b............. 11 Philippine National Bank v Manila Oil Refining & By-Products Company.......................................................................................... 12 Sec..................................................................................................... Indorsement................................................................................................................................................. ......................................................... ................. Blank Indorsement......... 11 Sec............................... 10 Sec............................................................. When Payable to order................................... 12 10..................................................................................................................................................................... ........................................................................ 10 a................................................. In case of joint payees ............................................................... 191............................................................................................. 8......................................................... Indorsement Must Be of Entire Instrument.......................................... 5.... 15 c................................. 13 3..................... 128................................................................................................................... ............................ What Constitutes Negotiation................................................................................................................................... 10 c........................... ..................................................... .... Kinds of indorsements.................. 14 a.................. ........................................................................ 14 Clark v Thompson................................................................................................................................................. 13 Sec........ 12 CHAPTER 2 – TRANSFER .................................................................................................. 14 4.................................................................... Maker and drawer .............................. 9 Sec................................................ When instrument is payable to bearer............................................................................................... ........................ Parties must be designated with certainty .. ....... 17 Sec........................................................................... 35... 15 Young v Hembree...................................................... ............... 16 a..................................................................................................................................................................................... Payee .............................................. .............................................................................................................. By signature on instrument or on allonge................................................................................. 15 Blake v Weiden ........................................................................................................... 40.................... 17 Sec....................... 17.............................................. 17 Sec.................... 13 2... Omissions not affecting negotiability...... Methods of negotiation .................................................... 15 Sec..................................... Construction Where Instrument Is Ambiguous........ Special and blank indorsements ........................................................ When Bill May be Treated As A Promissory Note...................... 43.......................... Drawee ................................................. 16 6................................................................................................. 15 5................................ 16 Sec............ 30...... How Changed to Special Indorsement............................ 6............................ When Effectual............................................................................................... 12 Sec................................................................ Additional Provisions Not Affecting Negotiability.................................................. et al...................................... 14 Sec............. Definitions and Meanings of Terms............................................................... Delivery........................ 130............................................................... When presumed.............................................................................................................................................. 14 b................................................................................................................................ 13 Sec................... 9 7................... 11 9..................................................................................... Seal................................. 10 Sec................................ v Clement ........................................................................ Bill Addressed to More than One Drawee................................ 13 1..................................................................................................................................................... 16................................................................................................... ................ Omissions..................... Special Indorsement............................................................................................................... 12 Continental Illinois Bank & Trust Co........... 32.................. Qualified indorsement ........................................................................................ 33....................................................................................................................................... 9 Ang Tek Lian v CA ............................................ Rules of construction ................... –........................................................................................................................................... Negotiation ................................................................. 9.......................... Provisions not affecting negotiability ................................................. Inc............................................................................ 10 Sec.................................................................................. Indorsement Where Name Is Misspelled................................................................................. 13 Sec................................................... Basis of classification ................................... 34........................................................................................ 13 In Re Martens’ Estate .............................................................................. 9 Wettlaufer v Baxter ........................................... Indorsement in Blank..................... 16 b................................................................................................................................ 10 b............................ And So Forth.......................... ...... If name misspelled ......................... Indorsement must be of entire instrument ..... 10 8................................... 17 ..................................... 31..................................................................... Indorsement of Instrument Payable to Bearer..................................................................................

.................................. 18 White v National Bank ........... Qualified Indorsement.................................................................. 19 10......................... Negotiation by joint or alternative payees or indorsees ..... 41............................................................................................................. ..................................................................................................... 17 Fay v Witte .......................................................... ................................................. Time of Indorsement............... 44... Restrictive indorsement ........... Sec.......... 18 Sec..... 19 Sec...... 20 ....................... 20 Sec................. 48................ Effect of........................................ Presumption........................................................................................................................... . 20 13..................... ................................................... Conditional Indorsement........................................................................................................................................................................................................................................................................................................................................................................................................................................................... 19 8.... 46......................................... Transfer Without Indorsement............................................................. 18 Leonardi v Chase National Bank of the City of New York .................................. Effect of Restrictive Indorsement................ Continuation of negotiable character ..... 19 Sec....... Presumption as to indorsements................... ................................................................................................................ 18 Sec................. Conditional indorsement............................................ 19 Sec........................................................................................................................... 17 Copeland v Burke............................. 19 Furbee v Furbee ........................................... Unindorsed instruments ............................................................................................................................................ 19 Sec........................... 49........ Indorsement in Representative Capacity......................................... 18 e...................................... 36...................................................................................................................................................................................................................................................... ........................ Bank of Roseburg ........ 19 12................................ Place of Indorsement................................................................... 19 Sec............ Striking Out Indorsements ................................................................... Effect of Instrument Drawn or Indorsed to A Person As Cashier .......... et al........... 18 d...................................................... 20 Sec................................................................................................................... 18 Sec. Rights of Indorsee........................................................................... 37........................................................................................................ 39............... 19 Simpson v First Nat....................................................................................................... 38.......................................................................................................... When Indorsement Restrictive ....................................................................................................... ........................................................ 19 Sec.................................................................................. Indorsement to or by collecting bank ............................................... .................................................. 47........................... 45.......................... 42........................ Presumption................ 18 7................................................... 18 Hutson v Rankin............................................................ Indorsement Where Payable to Two or More Persons..................................................................................................................................................... Indorsement by agent .................................. 19 9................ Continuation of Negotiable Character.......................... 19 11..................... 19 Whistler v Forster ................................................................................................................................................................................ Cancellation of indorsements.......................

1249. he  NIL divides negotiable instruments into two main becomes the groups: acceptor 1) Promissory note – evidences a promise to pay  Drawer is money. 1911) drawee accepts. usually for a long 2) Should the said party dishonor (i. Functions of negotiable instruments by one bank to another bank. Examples: secondarily liable  Certificate of deposit – instrument issued by Indorsers are secondarily liable. the purchase price to the seller of the goods. negotiable instrument (holder in due course) can rely 1) Indorser – payee of an instrument who on its face and need not inquire into past events which transfers it to another gave rise to its execution. INTRODUCTION Promissory note Bill of exchange primarily liable liable to pay until 1. transferor of personal property. when the Instruments Law. Feb. 2) Indorsee – person to whom the indorser  Any inquiry would entail delay in commercial negotiates the instrument. In the meantime the action derived from the whom payment is original obligation shall be held in abeyance. by indorsing the bill or note. the “delivery of promissory notes whom the promise to pay in a bill of payable to order or bills of exchange and other to pay is made exchange mercantile documents shall produce the effect of 2) Drawee – addressee payment only when they have been cashed or when of the order through the fault of the creditor they have been 3) Payee – person to impaired. factors:  Bond – evidence of indebtedness issued by a 1) That a demand or presentment be duly made on the corporation. The concept of negotiability Parties When the payee of an instrument transfers it to  Significant distinction between a negotiable instrument another by signing it at the back thereof. CC. It is in effect a written promise of the such instrument. becomes the holder transactions where profitability depends largely of the instrument 1  Maker is the person  No person primarily Note. that negotiable instruments do not constitute legal tender. to the depositor named therein. Kinds of negotiable instruments and unless the drawee accepts the  Instruments are negotiable when they conform to all the requirements prescribed by the Negotiable order of the drawer Nature to pay. 2) Bill of exchange – order made by one person to An indorser.” made 4. payable at a primary party. on the day named. payable either at a fixed time or on Secondary liability of drawers and indorsers is conditioned on two demand. Mitch De Ocampo | B2017 1 .e. and definite date in the future. a bank reciting a deposit of a certain sum of money. (Act 2031. however. (Called a bank draft when the order is made 3. and  Draft – order made by one person addressed 2) He warrants that he will pay the instrument when the two to a person having in his possession funds of conditions for his liability mentioned above have been such buyer.) 1) As a substitute for money1 in payment for property or 2. Parties and the nature of their liability services 2) As a means of creating and transferring credit Promissory note Bill of exchange 3) To facilitate the sale of goods 1) Maker – promisor 1) Drawer – person 2) Payee – person to who gives the order  Under Art.  Check – one who issues it orders his bank to thus assuming liabilities similar to that of a seller or pay the person named on the check. ordering the addressee to pay fulfilled. that a notice of such dishonor be given to corporation to pay a definite sum of money the secondary party sought to be charged. impliedly enters into another to pay money to a third person. two contracts: Examples: 1) He is selling or transferring the instrument to his indorsee. he is said and a non-negotiable one: A person who takes a to have negotiated or indorsed the same. fail to pay or accept) term. public or private. 3.

certain principles of equity and usages of trade which general convenience and a common sense of justice Sec. The origin of negotiable instruments sum certain in money.. so long as it is intended or adopted as exchange in which a person agrees to pay a sum of money at the signature of the signer or made with his authority. 196. – The have established. 3 Instruments Law of the US . Bill of Exchange Defined. (b) Must contain an unconditional promise or order to pay a 5. by the rules of the Law Merchant. whom it is addressed to pay on demand or a t a fixed or  Absent any of the requisites. or cambium  The signature may appear on any part of the trajectitium. and the authority of the agent may be established as in other cases of agency. History of the Negotiable Instruments Law Sec. be governed by the NIL but by the general law on contracts. – A negotiable promissory note within the meaning of this Act is an unconditional promise  Verbatim reproduction of the Uniform Negotiable in writing made by one person to another. Note: the fact that an instrument does not meet the foregoing requisites will not affect its validity. and  The bill of exchange was devised to facilitate the (e) Where the instrument is addressed to a drawee. one location in consideration of money received at another location. to regulate the dealings of signature of any party may be made by a duly authorized agent. 7. But one exclusively on the positive institutions and local who signs in a trade or assumed name will be liable to the same customs of any particular country but consists of extent as if he had signed in his own name. is drawn to the maker’s own order. 6-7. (c) Must be payable on demand. – No person is liable on the instrument whose signature does not  Law merchant – system of law which does not rest appear thereon. It is also termed cambium mercantile. merchants and mariners in all the commercial 4 No particular form of appointment is necessary for this purpose. approved by the National engaging to pay on demand. CHAPTER 1 – REQUISITES OF  NIL aims to encourage facility. it is not complete until indorsed by him. NIL]  The signature is binding whether it is in one’s 2 handwriting. he must be contract of cambium2 and to avoid the risks of named or otherwise indicated therein with reasonable transporting money. – A bill of exchange is an  The NIL applies only to negotiable instruments. 126. – An instrument to be negotiable instrument is issued. 191. the first codification of the law on drawer’s is shown. Liability of Person Signing in Trade or Assumed Name.  There are usually two contracts involved whenever a Sec. lithographed or Latin term meaning ‘exchange.) (a) It must be in writing and signed by the maker or drawer. instrument.’ Cambium locale is a contract of photographed. Form of Negotiable Instruments. Applicability of the Negotiable Instruments Law Sec. 19. NIL. Promissory Note Defined. Cases not provided for in Act. Sea during the Middle Ages. requiring the person to laid down by section one of the law. It will be valid and binding as long as the 3 Patterned after the English Bill of Exchange Act passed by intention to make the instrument the maker’s or Parliament in 1882. The Law of Negotiable Instruments (1947). Sec. countries of the civilized world. Authority. or at a fixed or determinable  Florentine and Venetian merchants along the Adriatic future time. convenience and NEGOTIABILITY efficiency in commercial transactions. 1. signed by the maker.  “In writing” includes “print”. or printed. 6. 18. except as herein otherwise provided. engraved. (See the car purchase negotiable must conform to the following requirements: example on pp. or at a fixed or determinable future Conference of Commissioners on Uniform States Laws time. certainty. 4 Ogden. or in default thereof. to unconditional order in writing addressed by one person to those instruments which conform with the requisites another. negotiable paper. How Shown. Written form and signature existing legislation. Signature by Agent. Where a note in 1896. 184. Sec. i.e. [Sec. on the briskness with which they are consummated. – Any case not provided for in this Act shall be governed by the provisions of 1. the instrument determinable future time a sum certain in money to order or to would not be negotiable and would therefore not bearer. (d) Must be payable to order or to bearer. a sum certain in money to order or to bearer. signed by the person giving it. Mitch De Ocampo | B2017 2 .

so that  Bill of exchange: plaintiffs can maintain this suit in their own names [YES]  Words which are equivalent to an order are sufficient. distinguished from a reference importing merely that the extrinsic agreement was the origin of the transaction. or “according to” such agreement.. negotiability of the paper is destroyed. all aspects except the date. collections we hereby. provided. then the order to pay is  The instruments contain two references to the extrinsic unconditional although the drawee is authorized agreements: (1) “For and in consideration of a contract and to reimburse himself from a particular fund. origin of the transaction. but is absolute and unconditional. or is agreement entered into this day with us by Arthur A. Facts:  The promise to pay is not “subject to” the extrinsic  Suit to recover the balance due on two instruments in writing agreement.. When Promise is Unconditional. Bishop & ordered to debit the disbursement to a particular Co. the whole amount remaining then constitute a promise. Bishop & Co. at their office in Boston. Ratio:  Order – a command or imperative direction. Reimbursement also  In short. for value received. Issue: Whether said instruments are negotiable. or subject to dated July 6. unconditional within the meaning of the statute. When unconditional coupled with…a statement of the transaction which gives rise to the instrument. as instrument. be taken from appears. Instruments are alike in any contingency.  An instrument to be negotiable must contain. 1922 and June 7.50 each. of Boston. true copy of this entire agreement. “though a. intended to sign. Mass. however. the first monthly payment to be made  The instrument must contain a promise or an order to upon the signing of this contract note. payments of $12.  The first reference is nothing more than a recital of the consideration. which does not affect the negotiability.  Where a certain time for payment is stated or the words “on demand” are used. promise to pay said Arthur A.” Sec. Mitch De Ocampo | B2017 3 . and the remaining eleven pay. or a particular account to be  GR: whenever a bill of exchange or promissory note debited with the amount. he is deemed an indorser. reimbursement is to be made. said company’s system of collection and we hereby. or But an order or promise to pay out of a particular fund is not constitutes the consideration of the bill or note. there is a promise. or a (2) statement of the to pass freely from one person to another. among other things. whereby we are entitled to the use of account.” p.. 3. to destroy negotiability the reference to a presupposes a previous disbursement. the unconditional. J.” and (2) “we hereby acknowledge the receipt of a Powell & Powell v Greenleaf & Currier (1932) – Slack. 1923. or contains a reference to some extrinsic contract in such a (b) A statement of the transaction which gives rise to the way as to make it subject to the terms of that contract. unaided by an inspection of the extrinsic (a) An indication of a particular fund out of which agreements to which they refer. in twelve equal monthly payments of $12. Mass. An unqualified order or promise to pay is constitute an order. or order. However. Mass. that upon the  Mere acknowledgment of a debt does not default on any one payment. collateral contract must show that the obligation to pay is  If no statement of where the disbursement is to burdened with the conditions of that contract. acknowledge the receipt of a true copy of this entire agreement. and we hereby “promise” is not absolutely necessary. an unconditional promise or order to pay a sum  Mere request or authority to pay does not certain in money..  If the signature is so placed upon the instrument For and in consideration of a contract and agreement entered that it is not clear in what capacity the person into this day with us by Arthur A. of Boston.50 each to be made upon the same date of  Promissory note: each succeeding month. – An unqualified order or  Whether these instruments are negotiable must be promise to pay is unconditional within the meaning of this Act determined from the language of the instruments though coupled with – themselves. to pay has been made. Bishop & Co. Also. 2. and whereby we are entitled to the use of said company’s system of not a maker or drawer. Unconditional order or promise to pay the sum of one hundred fifty dollars. 15  Not apparent how the negotiability of these instruments is affected by either of these references. the word unpaid shall at once become due and payable.  BUT the negotiability of a bill or note is not affected by a  The fact that the right is absolute and cannot be reference which is simply a (1) recital of the consideration defeated by a contingency greatly enhances its ability for which the paper was given. or by a (3) statement that is given  Sec 3(a) pertains to bills of exchange only since in accordance with the terms of a contract of even date reimbursement and debiting presuppose that an order between the same parties. for value received.

What Constitutes. Ratio:  A stipulation to pay a higher rate of interest if the note is paid at maturity or a lower rate if it is paid on or before maturity does not render the instrument non- Mitch De Ocampo | B2017 4 . – The sum  the he delivered to one Bragin a so-called check in the sum payable is a sum certain within the meaning of this Act. check must have had a valid inception. the non-negotiable agreement. Certainty as to Sum. plaintiff’s motion to strike out the counterclaim  The amount payable must be certain.  The bank. It did not “contain an unconditional promise or consideration of service to be thereafter performed by the order to pay. wherefore defendant rate. the instruments of the receipt of a true copy of the entire  To sustain plaintiff’s recovery herein. [NIL.000 against plaintiff. In the case of non-negotiable instruments. Sec 35] the signing of the instrument. an prior to him so as to make them liable to him is conclusively instrument to be negotiable must be payable on demand or presumed. thereafter.  Leff alleges by way of counterclaim that 3. the  Delivery – transfer of possession. granted payment shall not be made at maturity. in case  The Appellate Division. [Siegel v Chicago Trust &  No duty rests on a bank to call up its depositor when a Savings Bank] genuine check comes in to inquire whether it should be paid. Irving Trust Co. agreements. or Leff". or 502-14 Liberty Street. [Cowling v Altman] contracts rather than promissory notes and. thus. instruments before us with the terms of the extrinsic  The instrument was complete in form. whether at a fixed rate or at the current the face of the check had been met. (payable to himself) and indorsed to the plaintiff. actual or constructive provisions of the extrinsic agreements should be considered: from one person to another [NIL. of $1. the whole shall Leff's attorney and the plaintiff thereafter cashed the same become due. Sec. nothing more.  Neither is the second reference such as to burden the  Leff’s signature was genuine. par 2] payee.  An allegation of theft puts in issue the delivery of the check. the negotiability of the instruments is not affected by the fact  This order on the bank (check) was a non-negotiable that it appears therefrom that they were given for or in instrument. J. reversing the Special Term.  Irving Trust Company sued Leff for the balance of $4. unless have obtained this knowledge from Bragin or from any other it appears through the recital that it qualifies the time of available source. or without making any inquiry as to whether the conditions on (d) With exchange. a valid delivery thereof by all parties upon the signing of the instruments and under GL 2671. It is payable upon contrary is proved. took the chance in paying that the  The mere fact that the consideration for which a note is condition expressed on its face had been performed. for the protection of negotiable paper. 2. or demands judgment for $1. v Leff (1930) – Pound. inquiry by the bank of the maker is a necessary precaution for protection against imposition by Facts: a thief. the terms thereof are immaterial. a  SC: The first payment is payable at a determinate future valid and intentional delivery by him is presumed until the time within the meaning of the statute. (e) With costs of collection or an attorney’s fee. order of Special Term denying promissory note for $10. New Jersey is taken by Joe (b) By stated installments. payment or the sum to be paid.000. conclusively or subject to agreement. the thief has no title and can give none.” [NIL.000 executed by Leff to his own order the motion to strike out counterclaim affirmed. A check has no valid  Re defendant’s assertion that the instruments are bilateral inception until delivery.  Re defendant’s claim that the instruments are not negotiable  “Where the (negotiable) instrument is in the hands of a because they provide that the first payment is to be made holder in due course. Sum payable must be certain  he was a depositor in the plaintiff's bank and had a checking account with it. Camden.933 on a  Judgment should be reversed. which is immediately  But this provision is peculiar to negotiable instruments. It might given is recited in it will not destroy its negotiability. Sec 20. It is a mere acknowledgment by the signers of  The condition precedent to payment had been fulfilled. In cases where the law does not protect holders in p. And where the instrument is no longer in the at a fixed or determinable future time: possession of a party whose signature appears thereon. rebuttal. Sec 2]  SC: Since the instruments are not subject to such  Delivery is sometimes presumed. Issue: Whether Leff’s counterclaim is sufficient in law [YES]  An agreement to pay interest does not render the sum uncertain. 19 due course. drawn on plaintiff and having on its face the although it is to be paid – following words: "Void unless and until title to premises (a) With interest. of course. (c) By stated installments with a provision that upon default in  Bragin stole the conditional check from the possession of payment of any installment or of interest.

“money and current money”  “Money” as used in the NIL is not necessarily limited to indicates that such was not the purpose. Where a note is made payable in a country in the money or coins of another country. because a that the same does not set forth a cause of action. The use of the words. consideration”  Title 4. such a note by the rules of the law merchant and upon a promissory note alleged to have been made by the under the Uniform NIL is negotiable. but leaving particular kind of current money in which payment is to be the amount thereof blank. it is  However. that is to say in its coins “or in the known do an act in addition to the payment of money is not currency of a country. subd. Art 1. election to require something to be done in lieu of  The law merchant is international in its character and was payment of money. NIL. money or coins have a value fixed by the law or under the p. such stipulation will be itself is but a mere device. defendant for the sum of “15. an instrument otherwise developed for the purpose of facilitating trade in commerce negotiable would not be affected thereby.e. amounts to a promise to pay a made” reasonable sum as attorney’s fees. therefore. i. subd. since it is entirely without force until either Issue: Whether the note in question is negotiable [YES] the maturity thereof or its payment before maturity.” affected by said stipulation.23 authority of the law of the country where the note is payable. Sec 196 that “in any case not provided for in 4. that. or in legal tender. which equivalent is therefore. must allege a consideration which it does not do. It has value only by law and not by ineffective and the obligation can be discharged nature. So that a change of convention between those that only in legal tender.  This contract is a contract for the payment of money and not a  Defendant moved to strike out the complaint on the ground commodity. and does not make the  Art 2. Certainty of time of payment  For the purpose of informing the holder of the 5 Sec 6(e).. instrument of the date when he may enforce payment Mitch De Ocampo | B2017 5 . use it is sufficient to deprive it of its value and of its power to  But the negotiability of the instrument will not be purchase our requirements. Money is what the law or custom payment is to be made in a currency other than makes receivable for payments of taxes and debts. render the sum uncertain. 2 that an instrument to be a provision that the same is payable in Philippine currency negotiable “must contain an unconditional promise or at a fixed rate of exchange or at the rate current at the time order to pay a sum certain in money” payment is made. between different countries. Such amount may be fixed by prima facie to have been issued for a valuable the court. but for a commodity and previously referred to.  The Uniform NIL of this state provides in  An instrument expressed in a foreign currency may contain  Title 1. purpose. 5. This provision does not affect the  Sec 6. J. The complaint. is negotiable for in all these cases the negotiable. sum of money is fixed by the par of exchange on the known  But if the order or promise gives the holder an denomination of the currency with reference to the par”. expression for the equivalent in dollars. negotiable. This note was made for a sum certain. instrument is not affected by the fact that it “designates a  A provision in an instrument for attorney’s fees.  The sum is certain although it is payable in installments as Ratio: long as the latter are “stated”. note for any number of Italian lire is only another form of  The note in question is not negotiable. Payable in money this act the rules of the law merchant shall govern”  If it had been the intention of the Legislature to provide that a  Since negotiable instruments are intended to be note in order to be negotiable must be payable in lawful substitutes for money.  It is well established that an instrument payable in the money  An instrument which contains an order or promise to of any country. to properly perform such money of the US. now established under the authority of the legislation  The note was not made for money. “Money by Philippine currency. Sec 1. for the payment of the sum named in Italian lire makes it non-  Neither will an acceleration provision based on default negotiable. it would have been a function they must necessarily be capable of being simple matter to have used language appropriate for that transformed into money if the holder so wishes. and which value can by a simple mathematical calculation be Facts: expressed in the value of the lawful money of the latter  Action was brought by the plaintiff against the defendants country. Sec 24 that “every negotiable instrument is deemed instrument non-negotiable. 5 that the negotiable character of an negotiability of the instrument. 5 “legal tender . includes any particular kind of money.  What is money? Money is purely a legal institution.400 Italian lires”. et al. of a contract contains a stipulation that impossible without law. which Incitti v Ferrante. Art 1. the amount of each  The note in question is negotiable in form unless the provision installment and its due date are fixed in the instrument. there is no presumption that it was made upon a legal consideration. (1933) – Del Mar.

Learning of this. option to accelerate. the time of payment is rendered uncertain and the instrument would not be Where an instrument is issued.800) payable in 10 equal installments over a period of acceptance or any indorsement thereon is dated. unless whether such acceleration provision renders the there is a valid acceleration provision. the following rules of construction apply: properties which were given as security for the loan. or  The option given to the holder to accelerate the indorsing it.. 31. payable on demand.  RFC now claims that the payment made by Madrid on Oct. 31. event which is certain to happen. Estelito Madrid and (c) On or at a fixed period after the occurrence of a specified Jesus Anduiza (1954) – Concepcion. collateral security to make good a depreciation in value of the original security. 1944 was not valid due to the fact that the obligation was not d. meaning of this Act. a.  Where the option to accelerate the maturity of the 1951”. Effect of acceleration provisions yet due and demandable at that time. 7. as regards. such date is 10 years. deemed prima facie to be the true date of the making. maker dies before maturity. Payable at a fixed time 7 affect the negotiability of the instrument. Oct. instrument is on the maker. Determinable Future Time. – Where the instrument or an (P13. though the time of p. the person so issuing. of the note or the acceptor of the bill to pay. thereof. 17.6 6 7 This is the situation covered by Sec 4(b) Expressly allowed by Sec 2(c) Mitch De Ocampo | B2017 6 . Same rule where acceleration is automatic upon  Holder may demand payment only on. be dated as of the time it was issued. as the case may be.g. xxx  TC rendered judgment against Madrid. 32 happening be uncertain. (b) On or before a fixed or determinable future time specified therein. or on presentation. overdue. 31. It is merely converted to a demand failure of the maker to deposit additional instrument. the date indicated. – An instrument is payable on over which he has no control. Madrid instituted an action against RFC after the the language of the instrument is ambiguous. or at sight. Industrial Bank (RFC’s predecessor) on Oct. within the operation of law (e. it will be considered to  CA reversed TC. Payable at a determinable future time that such a provision does not destroy negotiability. whether such option is Issue: Whether payment made by Madrid was valid [YES] absolute or conditional. 4. or there are latter had refused to cancel the mortgage of Anduiza’s omissions therein. instrument non-negotiable depends on the nature of the provision. 1942 and 1943. maturity of an installment note upon failure of the maker to pay any installment when due does not b. (c) Where the instrument is not dated. and not before. Madrid paid the AIB on Oct. Before such time. Construction Where Instrument is Ambiguous. 31. the instrument becomes overdue but remains valid  Where the acceleration takes place upon the and negotiable. The promissory note provides that the amount is to be paid “on or before Oct. – An  Acceleration of the maturity of the instrument by instrument is payable at a determinable future time.  Jesus de Anduiza borrowed money from the Agricultural and and the happening of the event does not cure the defect. accepted or indorsed when negotiable. default.  Anduiza failed to pay the yearly amortizations that fell due on acceptance or indorsement. the majority view is c. or negotiability. which is expressed to be payable – maker is declared an insolvent) does not affect its (a) At a fixed period after date or sight. J. 4. unconditional. Sec. the negotiability of the instrument is not affected. Should he fail to demand payment. he cannot compel the maker  Where the acceleration is at the option of the holder. Sec. or  Where the holder’s right to exercise the option is (b) In which no time for payment is expressed. What Constitutes. Facts: An instrument payable upon a contingency is not negotiable. 11. When Payable on Demand. Presumption As To. it is. 1941.  Obligation was evidenced by a negotiable promissory note Sec. Date. then the negotiable demand – character of the instrument is not affected by the (a) Where it is expressed to be payable on demand. When payable on demand  If the option can be exercised by the holder only upon the happening of a specified event or act Sec. accepting. – Where  In 1948. drawing. 1944 the full amount of the obligation. or Rehabilitation Finance Corporation v CA.

J. it is payable at the date in question of the notes has no control.Ratio: Puget Sound State Bank v Washington Paving Co. et al. time. default. 623. then both principal and due to it upon its deposit credit in Olympia Bank. (1917) –  Although the full amount of the obligation was not Parker. p.50.712.  Judgment was entered against Madison Aerie in the principal action for $1. The exact due date is thus left to be Henry v Madison Aerie No. the court found that:  The bank had on deposit funds of Madison Aerie to the amount of P958. holder of and seeking recovery upon these notes. The notes contained the provision: Utah State National Bank v Smith et al.02. at the option of the payor. or in advance. or agreement of WPC. brought an action against the Bank & Trust Company. transfer to PSSB destroyed the defense of set-off invoked by  “Determinable future time” [Sec 1556. the payment being ascertainable at the date of presentation. maturity is not less determinable in the future for it may alleging that the bank had in its possession money belonging be fixed by the payee at any reasonable time after such to Madison Aerie. 31. demandable prior to Oct.) thereof to enforce its payment. Wisc. the date of connection garnished the First National Bank of Madison. (1933) – Fowler. Fraternal Order of Eagles of determined at a future date by the option of the payor. The right to exercise such power possessed  A note payable “on or before a fixed date” is payable at a by the payee is not dependent upon nor does it grow out of “determinable future time. the maker of the  If the instrument expressly states that it is payable “on or note. before maturity. without indorsement. exercised before the fixed due date.” the exact date of  The quoted provision gives Olympia.  Smith et al. (1919) – Wilbur. and thus interest shall become due at the option of the holder of the note. in the payment of interest) and interposed a defense valid  Implication: If Olympia. It was thereafter transferred by makers (Smith et al.” any act. On trial of the garnishment action.” A future determinable time could be one determinable at some time in the future. asserted that the note was non-negotiable (in  Olympia became insolvent and PSSB sought recovery upon light of the provision for accelerating the due date for default the two promissory notes. if Madison. they were entitled to set off against the amount due thereon to PSSB a greater amount Issue: Whether the note is negotiable [YES] which was owing to the WPC from Olympia upon a deposit credit at the time of the transfer of the notes by that bank to Ratio: the plaintiff. p.  WPC executed two promissory notes (each for $5K) payable to its own order.  A note is negotiable if payable at a “determinable future  PSSB appealed. Mitch De Ocampo | B2017 7 . 1951. at any earlier date selected by him for payment.  Bank of Madison denied the allegation. in view of the provision of p. J. USNB  LC ruled in favor of WPC upon the ground that while the notes appealed. to PSSB. instead of PSSB. WPC could offset against the debt evidenced thereby the amount If the interest is not paid when due.  Verdict was rendered favorable to Smith et al. was still the against the payee therein. 35 the note relative to the payment in 10 installments. the payee. it is a contingency over which the maker before” a fixed date. 37  The due date is no less “determinable” when the option lies with the payee instead of the payor. evidenced their legal obligations. claiming to be bona fide purchasers for value of a  WPC thereafter indorsed the promissory notes to the Olympia negotiable promissory note. In other words. 33 This note shall become due and payable on demand at the option of the payee when it seems itself insecure… Facts:  USNB. unrestricted power to declare the notes due at any time but not before.  Court entered judgment against the bank. promise. or. 3085 of our Code] WPC [NO]  An instrument payable at a fixed period after sight is Ratio: payable at a “determinable future time. it is clear that the makers or debtors were entitled to make a complete Facts: settlement of the obligation at any time before said date. If the option of Facts: the payee is limited to the case of a default in the  Henry sued Madison Aerie upon an express contract and in payment of an installment of interest. Olympia by delivery only. as well as one determinable at Issue: Whether the notes are negotiable in the sense that their present. satisfy such debt if it did not exceed the amount of such deposit credit. J.

” that negotiable must be payable on demand or at a fixed or failure to pay interest when due rendered the note due determinable future time and Sec 3060-a4 undertakes to absolutely and not at the option of the holder. Subsequent payments were made but nothing was said about  No defense was interposed to the latter note. Iowa v Gunderson (1927) – Miser. they were determinable future time. Code 1919. The terms of the whether they should be paid at a particular time in one year. 1904. the instrument is still negotiable because with or without such provision. 1708 the instrument would be non-negotiable under and 1886. Two of the notes were drawn payable to Fred B. defaults of nonpayment of the installments on the due dates. State Bank of Halstad. operated to reduce the amount due thereon just as payments  In this case. and the due Dec. 1907. fixed period after the occurrence of a specified event. p. 1. define what is meant by a determinable future time. but one was  The garnishment summons was served on Aug. the extension is not determined by the maker’s made after the due date specified in a note without an whims but rather by the occurrence of the harvest which is acceleration clause would so operate.”  But where a note with a fixed maturity provides that the maker has the option to extend the  Appellant contends that the note is non-negotiable because payment until the happening of a contingency. the holder may choose to be The makers. 25 and 26 is below 8 bushels Issue: Whether the bank had the right to apply the deposits per acre this note shall be extended for one year. hereon severally waive presentment for payment. 1. Lawrence and the other to the order of the  Madison Aerie defaulted on the payment of the notes. and consent that the time of its payment may maturity. J. Rev. themselves and to force upon them a contract to which The only uncertainty as to the time or fact of payment was neither of them ever gave their consent. where the holder is given the option to extend the time of payment by mere inaction or Facts: indulgence for an indefinite time depending on his  Promissory note in suit: will. guarantors of this note. all defenses on the ground of any and thus payable on demand. 42  Similarly. that a note be payable at a the second paragraph of Section 4.  The bank held two notes of Madison Aerie ($3K each). this clause offends against the requirement of both Secs. indorsers. which is and acceptance of the payments thereafter tendered merely certain to happen is negotiable. contract are so clear as to seemingly preclude the or at the date named in the next year. determinable future time. Provisions extending the time of payment Security National Bank of Sioux City. payable in installments at specified dates. the instrument merely becomes overdue be extended without notice. construction. towards their payment [YES] Issue: Whether the two notes are negotiable [YES] Ratio:  It was held in Hodge v Wallace. and the sureties indulgent.  An extension provision would not affect negotiability.”  Sec 3060-a4 expressly says that a note is payable at a  The notes being due immediately upon the default. under a clause providing that Ratio: default in payment of interest when due should “cause the  Our negotiable instruments act says that an instrument to be whole note to immediately become due and collectible. Bilstand and Jn. extension of time of payment being hereby expressly waived. or that is payable on or before a due when the subsequent payments were made upon them. State Bank of Halstad v Bilstad (1912) – Sherwin. 40 contained an acceleration clause as follows: Facts: Failure to pay any installment as the same becomes due shall  Suit to recover on three promissory notes executed by render the entire obligation then due and payable. M. e. but extending the time of payment of the notes or waiving the counterclaim were pleaded as to the other two. C.  “To construe such language (that of the acceleration  The notes in suit provided for an extension of time for one clause) as merely optional or permissive would destroy the year on the condition therein named. April 23. The notes p.  The notes bore the same date. 1905 and the other Dec. protest and  Should he not demand payment at the date of notice of dishonor. 15. They both contain bank thereupon applied the amount of the deposits upon the the following provision: notes. It is agreed that if crop on Secs. The time at which they clearly expressed contract which the parties made for must eventually become due was therefore fixed and certain. certain to happen. Issue: Whether the note is negotiable despite the clause [YES] Mitch De Ocampo | B2017 8 . Hetland.

but any term which clearly 1) The note. negotiable instrument within the meaning of the negotiable  These words serve as an expression of consent that the instrument act [NO] instrument may be transferred. or Ang Tek Lian v CA (1950) – Bengzon. by signing his name on the back of the  Consent is indispensable since the maker note and selling and delivering it before maturity to assumes greater risks under a negotiable Wettlaufer. When the instrument is payable to order meaning of the act.. (b) When it is payable to a person named therein or bearer. have that right does not affect the negotiability of the paper. When instrument is payable to bearer to a note on its face or by its terms negotiable. must be 1) Whether the note before the indorsement by Baxter is a payable to “order” or “bearer”. 1906. and any other parties who might be or become liable thereon under certain Wettlaufer v Baxter (1910) – Carroll. conditions under which a note negotiable on its face might become payable to bearer. case the holder and the maker should agree upon an Baster. the sureties and indorsers should not be discharged. which was payable to Baxter alone. 2) If not. convert it into a negotiable note [NO] instrument than under a non-negotiable one. The holder and maker of any note may at any  Baxter wrote his name on the blank of the note and time agree upon an extension. or Facts: (d) When the name of the payee does not purport to be the  Knowing he had no funds therefor. An instrument to be negotiable must Sec. indorsers. sureties. in order to be considered negotiable.” p.”  The note was dishonored on presentment. two hundred fifty dollars at 58 Carroll St. J. J. therefore the fact that they discounted it with Wettlaufer. Buffalo. or others. 6. 50 person. Must be payable to order or bearer  The instrument. When Payable to Order. and such fact was known to the person making it so payable.Y. i. These words by Secs 1 and 184 are indispensable to make the paper a negotiable instrument within the a. Therefore what was meant by the stipulation as to the extension of time was simply that in January 15. N. Mitch De Ocampo | B2017 9 . instrument.” was not a negotiable requirements is sufficient. or  “This provision seems to us to have been inserted to protect (e) When the only or last indorsement is an indorsement in the holder against any release of indorsers.Ratio: name of any person. the instrument need not follow the Ratio: language of the law. but this does not mean that an instrument. When Payable to Bearer. whether Baxter. Sec 1. – The instrument is payable to conform to the following requirements: (4) must be payable order where it is drawn payable to the order of a specified to the order of a specified person or bearer. Issues: must contain “words of negotiability”. 48  “The obvious purpose of the provision taken as a whole was merely to relieve the holder of the paper from the burdens Facts: made necessary by the rigid requirements of the mercantile  Action by the holder against the payee-indorser of the law in order to secure the continued liability of the indorsers following note: and sureties upon the paper. after date we promise to pay to Newton J. contingencies as makers. person or to him or his order… 2) It is true that Sec 9 of the act provides that “the instrument is payable to bearer…when the only or last indorsement is an  There must always be a specified person named in the indorsement in blank”. by an blank..e. and the word ‘makers’ is evidently included to prevent any misunderstanding or  Only instruments under paragraphs a and b of Sec 9 misconstruction of the contract or failure to distinguish are expressly made payable to bearer. Wettlaufer sued Baxter. extension. or (c) When it is payable to the order of a fictitious or non-existing p. 8. – The instrument is payable to  Baxter should be treated as merely the assignor of a non- bearer – negotiable note. Due note was sent to Baxter. Ang Tek Lian drew a check upon the China Banking Corporation for the sum of P4K. It means that the bill or note is to be paid indorsement in blank converts a non-negotiable note on its to the person designated in the instrument or to any face and by its terms into a negotiable note… person to whom he has indorsed and delivered the  Sec 9 was merely intended to describe or designate the same. (a) When it is expressed to be so payable. Sec. and was not intended to apply b.  Sec 3720B. extension without their assent. and did not indicates an intention to conform to the legal contain the words “to order” or “bearer. 9. between makers.  Under Sec 10.

130. 128. presentment.” holder. and not as a the instrument either as a bill or a note. or  Ang Tek Lian now argues that as the check had been made (b) The drawer or maker. Sec 43 provides that “where the name of the indorsement. so that no indorsement is required. or when Lee Hua Hong accepted the check. Check was returned because the drawer had alternative or in succession. Parties must be designated with certainty where the drawee is a fictitious person. or payable to “cash” and had not been indorsed by him. Where a check is in the ordinary form. a bank. Maker and drawer capacity to contract. or 7.  Although a bill may be addressed to two or more  The drawee’s name is usually written on the lower drawees jointly. or a person signature. Ang Tek Lian was convicted of estafa. to which c. but may his name is misspelled.  Long-established customs as to the placement of signature:  Where the instrument is addressed to a drawee. either as a bill of exchange or a promissory note. the may indorse the instrument as therein described. for name sometimes appears across the top. but it was dishonored for insufficiency of him or his order. and is payable to bearer. Ang Tek Lian contends that (d) Two or more payees jointly. whether they are  Also. or a person not having a. payee is wrongly designated or misspelled. the latter did so with (e) One or some of several payees. having been “otherwise indicated with reasonable  A check payable to bearer is authority for payment to the certainty. When Bill May be Treated As A Promissory Note. When Payable to order. – Where in a bill the drawer and drawee are the same person. Drawee it is presented for payment. be addressed to two or more drawees jointly. The law solves this by having no capacity to contract. does the instrument lose its  Under Sec 9(d). he can still be regarded as pay it to the person presenting it without any indorsement.” and hence the instrument is payable to bearer. he  The maker of a note or the drawer of a bill must must be named or otherwise indicated therein with sign the instrument. the form of the check was totally unconnected with the partners or not. word “cash” “does not purport to be the name of any person”. 8. Sec. he is not (c) The drawee. no one can ever be made primarily liable on the bill. otherwise there would be no certainty as to the person  The payee and the successive indorsees negotiate to whom the bill should be presented for payment or the instrument by signing on the back. and the bank may pay it with reasonable certainty? to the person presenting it for payment without the drawer’s  NO. drawer. Bill Addressed to More than One Drawee. Where the instrument is payable to order the payee must be Issue: Whether a check payable to the order of “cash” is payable named or otherwise indicated therein with reasonable certainty. (a) A payee who is not maker. because maker or drawer. he  Where a check is made payable to the order of “cash”. – The instrument is payable to  The check was presented by Lee Hua Hong to the drawee order where it is drawn to the order of a specified person or to bank for payment. or drawee. but not to two or more drawees in the dishonor. not because the drawer’s indorsement is lakcing. although in checks the bank’s more drawees in the alternative or in succession.  Once a party to an instrument deviates from the  Where the drawer and drawee are the same person. signature is usually written reasonable certainty. and is not negligent in failing to do so. NIL. Payee Hong in exchange of money which the latter handed in the act. Mitch De Ocampo | B2017 10 . it may not be addressed to two or left-hand corner. the holder may treat considering such a person as an indorser. at his option. if he thinks fit. – A bill may identified. at the lower right-hand corner thereof. adding. It may be drawn payable to the order of – funds. to bearer  Should the name of the payee be misspelled or Ratio: wrongly designated. ambiguity arises. or full knowledge that it would be dishonored upon (f) The holder of an office for the time being. He delivered it to Lee Hua b. or commercial usage with respect to the place of where the drawee is a fictitious person. his proper signature. Sec. a check drawn payable to the order of negotiability as one wherein the payee is not indicated “cash” is a check payable to bearer. payable to the order of “cash”. or guilty of the offense charged. acceptance. need not have the holder Sec. The drawee  If he may indorse it. then that means that even if bank did not obtain any indorsement of the check. insufficient funds. otherwise. the holder may treat the instrument.

contemplate that all defendants shall have an Sec. because it would in effect  While judgments by confession as appeared at common grant the holder an option to accelerate the maturity law were considered an amicable. instrument be not paid at maturity. (c) Waives the benefit of any law intended for the advantage or  Appellee’s contention: NIL expressly recognizes judgment protection of the obligor.  A clause in the instrument waiving the rights of Such warrants of attorney are void as against public policy. commercial world which outweigh these considerations. the provisions of the Code of Civ Pro. and their right to due notice of these instruments the promisor bargains away his right to a dishonor and of protest when protest is required. with interest. instrument which contains an order or promise to do any act in  Further. NIL which states that “the negotiable done in lieu of the payment of money. costs.  Moreover. and because the effect of the instrument is to not destroy its negotiability. the assumption is that he  Agreeing with the “prominent attorneys-at-law with banking intended to be primarily liable himself. secondary parties to have the instrument duly because they enlarge the field for fraud. character of an instrument otherwise negotiable is not affected by a provision which xxx (b) authorizes a confession But nothing in this section shall validate any provision or of judgment if the instrument be not paid at maturity. because under presented for payment. authorized nor contemplated by our law. instrument is treated as a note instead of a bill. the Court  If the bill names no drawee but is accepted by a third states that neither the Code of Civil procedure nor any other party.  On the contrary. he cannot afterwards (a) Authorizes the sale of collateral securities in case the maintain an action against the plaintiff therefor. 5. rights to institution. Issue: Whether a provision in a promissory note providing that in case the same is not paid at maturity. the acceptor could be held as a maker. (b) Authorizes a confession of judgment if the instrument be CC. In the course exemptions is valid [NO] of time. 57 and should only be considered as valid when given express legislation. saying that this provision cannot be taken to sanction judgments by confession. and  The practice of entering judgments in debt on waives all errors. thus rendering the time of payment settle and secure debts. instrument be not paid at maturity. – An opportunity to be heard. or  Another indication of fundamental legal purpose is Art.  Court disagrees. a warrant of attorney to confess judgment became a familiar common law security. which provides that the validity of contracts cannot be left not paid at maturity. the maker authorizes any attorney to appear and confess judgment thereon for the principal amount. although the issuer of the bill cannot be held as remedial statute expressly or tacitly recognizes a confession drawer. easy.” stipulation otherwise illegal. and all property warrants of attorney is of ancient origin. there are disadvantages to the uncertain. because it is a portion  The negotiable character of an instrument otherwise of a uniform law which merely provides that in jurisdictions negotiable is not affected by a provision which where judgment notes are recognized. or notes. the Court is of the opinion that a particular kind of current money in which payment is warrants of attorney to confess judgment are not to be made. does day in court. 1255. The of judgment commonly called a judgment note.  The fact that an instrument bears a seal or designates  Given the foregoing. an authorization which empowers the holder words: “But nothing in this section shall validate any to sell the collateral before the maturity of the note provision or stipulation otherwise illegal. the same section of NIL concludes with these  However. in relation to constitutional safeguards relating to the right to 8. strike down the right of appeal accorded by statute.  Since the drawer was responsible for naming Ratio: such a drawee. But the counterclaims argue against judgment notes. Provisions not affecting negotiability take a man’s property only after a day in court and after due process of law.” renders it non-negotiable. such clauses shall authorizes the sale of collateral securities in case the not affect the negotiable character of the instrument. and attorney’s fees. connections” whose advice the Court solicited. The Court also went on to say that provisions in notes authorizing Philippine National Bank v Manila Oil Refining & By-Products attorneys to appear and confess judgments against makers Company. J. should not be recognized in this jurisdiction by implication p. the provisions of the Code of Civ Pro pertaining to addition to the payment of money is not negotiable. or to the will of one of the contracting parties. does not affect its negotiable character. (1922) – Malcolm. Inc.  Two kinds of judgment by confession in common law: Mitch De Ocampo | B2017 11 . Additional Provisions Not Affecting Negotiability. and cheap way to of the instrument. especially as negotiable character of an instrument otherwise negotiable is the Code provides that in case the defendant or his assignee not affected by a provision which – omits to set up a counterclaim. they are enforceable under the regular procedure as (d) Gives the holder an election to require something to be provided by Sec 5.

[Sec. he is to be deemed an indorser. provisions of the instrument. or p. viz: (sundry security) and further to secure said note instrument [Sec. Thorpe. transfers any and all other property … now or hereafter and  Indication that the value was received because the howsoever in the possession or control of the holder hereof. but judgment address is stated. Facts:  Suit in the promissory note signed by the defendant Belle W. – The validity and (f) Where a signature is so placed upon the instrument that it negotiable character of an instrument are not affected by the is not clear in what capacity the person making the same fact that – intended to sign. and that stated in the instrument. The rule was changed by the statute. Plaintiff appealed. unless authorized by statute. of plea. 17(c). 24. 17. (c) Does not specify the place where it is drawn or the place where it is payable. [Sec. corporate seal forms part of a corporation’s Trust Company.. if not. the written provisions prevail.  A number of jurisdictions in the US have accepted the the interest runs from the date of the instrument. or be jointly and severally liable thereon. Particular Money. from the issue thereof. residence of the person to make payment. NIL] Issue: Whether the note is the joint obligation of the two makers [NO] 10. the holder may treat it as either at his election. viz. The defense urged that the requiring in certain cases the nature of the consideration to be note is the joint obligation of the two makers. the following rules of construction apply: written confession of action against him. NIL] (Signed) Bryon C. Construction Where Instrument Is Ambiguous. Thorpe  If no place of payment is mentioned. the law fills in the pledged. at the place of business or was entered non obstante. Rules of construction Ratio: Sec. In promises to pay to the order of Continental Illinois Bank and practice. or Continental Illinois Bank & Trust Co. (a) Where the sum payable is expressed in words and also in impliedly authorizes plaintiff’s attorney to sign figures and there is a discrepancy between the two. of attorney to confess judgment are void. Ill. (e) Where the instrument is so ambiguous that there is doubt 9. Sec. If it is not dated. 73. the common law rule was that an instrument issued under seal of the maker was non. and the date is necessary To secure the payment of this note … the undersigned has to fix the maturity of the instrument. NIL]. or there are Mitch De Ocampo | B2017 12 . Clement gap by providing that presentment should be made at the address of the person who is to pay. without specifying the date from which interest is to run. as against (d) Where there is a conflict between the written and printed public policy. But nothing in this section shall alter or repeal any statute Clement and Byron C. reference may be had to judgment made after plea pleaded. 13. at its office in Chicago. cognovit actionem accompanied by a withdrawal (b) Where the instrument provides for the payment of interest. … instrument was presumed to have been issued for a valuable consideration. if such  The jury’s verdict was in favor of the plaintiff. the judgment and issue execution. – Where The note in suit is the joint and several obligation of the makers.. for value received negotiable. but if the 2) Confession relicta verificatione – a confession of words are ambiguous or uncertain. NIL]. or that any value has been pay” is signed by two or more persons. or (g) Where an instrument containing the words “I promise to (b) Does not specify the value given. (a) It is not dated. v Clement – North. others still refuse to sanction them. Sixty days after date. the law fills in the (Signed) Belle W. while instrument is undated. plaintiff cannot recover because one of them was not made a party defendant. Note in question:  Prior to NIL. Thousand Dollars. The weight of (c) Where the instrument is not dated. they are deemed to given therefor. transferred and delivered to said bank the following gap and considers the date of issue as the date of the property. it will be considered to opinion is that. Twenty-Four signature. and allows any holder to and liabilities the undersigned hereby pledges. warrants be dated as of the time it was issued. a the figures to fix the amount. J. 64 (e) Designates a particular kind of current money in which payment is to be made. Omissions. 6. sum denoted by the words is the sum payable. Seal. Omissions not affecting negotiability whether it is a bill or note. (d) Bears a seal. 1) Judgment by cognovit actionem – a defendant’s omissions therein. assigns and insert the true date [Sec.  A date in a bill or note is not essential to make it negotiable. the undersigned. the language of the instrument is ambiguous. and if the common law view of judgments by confession.

On the back of the note was the endorsement: possession is the holder. Definitions and Meanings of Terms.500 against the administrator of Martens’ estate → possession of it. Delivery. He was later told by decedent that she had executed a this note is in the form to agree with a subject in the singular. a valid delivery by him is presumed until the contrary is Sec. As to the holder in due course.”  Delivery must be intended to give effect to the instrument. that she told others that she wanted the plaintiffs to have the property and that she had prepared papers for  Delivery of the instrument – transfer of possession. providing. Negotiation in the possession of the person who has signed it. DENIED by TC for failure to establish legal delivery of the note xxx  Mabel’s testimony:  Decedent (Mabel’s mother) died on Jan 2.” subsequent to March 1. 1930 and did not receive her $500. 191. If payable to bearer it is negotiated by delivery. 16. Ratio: NO. signed by the  If payable to order. note in favor of Mabel. the person in possession is $500 is what the rest got also. He told the decedent to deliver the note to him and. 1936. from one person to another. This was the common law rule. who is in for $1.” the bearer as well as the holder.  The envelope contained a handwritten note.  Dow Law Bank v Godfrey: If an instrument worded in the  Simon Fisher’s testimony: In 1930. When presumed. Mitch De Ocampo | B2017 13 . etc. A note so drawn would clearly fall within Issue: Whether there was delivery of the note [NO] the above-quoted portion of the NIL and the decisions cited. Conforming to this construction. they are deemed to be jointly received $500 when they were married. In her mother’s handwriting was the holder and this possibly a holder in due course capable notation: “Please give this to S. complete. NIL] Sec.500 owed by her several one. J. xxx p. When Effectual. which she had placed in a safe at not in the plural. [Sec 191. provided the instrument is such manner as to constitute the transferee the holder thereof. Delivery and issuance negotiable instrument is incomplete and revocable until delivery of the instrument for the purpose of giving effect Sec.  Negotiation – the transfer of a negotiable instrument  On March 11. She put the deeds in her safety deposit box and actual or constructive. 67 “Bearer” means the person in possession of a bill or note which is payable to bearer.500. – An instrument is proved. the obligation is a joint and note from her mother in satisfaction of $1. Mother. What Constitutes Negotiation. par 6. NIL] legal delivery of the deed in question. if payable to  Issue or issuance of the instrument – first delivery of order it is negotiated by the indorsement of the holder the instrument complete in form to a person who takes completed by delivery. Mabel agreed to accept a singular is executed by several. “This money is coming to her for teaching $1.” of his transferor. Facts:  Mabel Martens Bonk (appellant) filed a claim based on a note “Holder” means the payee or indorsee of a bill or note. it as a holder. – Every thereto. if stated in such words as would eliminate the seeming she wanted to. of acquiring a better title to the instrument than that Mabel Martens from Mother. to turn it over to Mabel. father’s estate but it was not paid because of insufficient  It is quite persuasive that each of the several verbs used in funds. the note could not be made the basis of a valid claim against the estate unless there was a legal delivery of the same during CHAPTER 2 – TRANSFER the lifetime of the decedent. However. the negotiated when it is transferred from one person to another in presumption is conclusive. The Negotiable Instruments Law of this state provides:  She had loaned her parents $1. ambiguity would read: Each (not both) of the undersigned promises to pay. and  If payable to bearer. the payee or endorsee in deceased. 1936. 30. We do not think these admitted facts show a [Sec 191. her brothers and sisters had signed by two or more persons. she married and severally liable thereon. or the bearer thereof. the note if home. she discovered an envelope in her made in such manner that the transferee becomes a mother’s safe. retained the key. par 10.  Sec 9746 of the Code provides that every contract on a 1.000 out of the money “Where an instrument containing words “I promise to pay” is earned teaching school. once the instrument is no longer 2. – In Re Martens’ Estate (1939) – Miller. Fisher in case of death. contract on a negotiable instrument is incomplete and  Orris v Whipple is controlling: “All there is to show delivery in revocable until delivery of the instrument for the purpose of the case is that the deed was prepared and executed by Miss giving effect thereto… Aken.

How indorsement made  Sec 4986 was not intended to establish the loose and undesirable practice of making regular indorsements of a. note and mortgage. special indorsee without his indorsement. the assignee in the place of the assignor. The Uniform Commercial Code is more specific and requires that the paper be so “firmly  An instrument payable to order requires for its attached affixed thereto as to become a part thereof. that is.  An indorsement has a double significance: W. nut the prevailing assignee. can be validly used only when there is no longer  A negotiation may be for value or by way of gift.  In Bishop v Chase. not a holder. the transfer is an ordinary made upon an “allonge”. By signature on instrument or on allonge commercial paper by writing on the back of any other paper or document to which it might be temporarily attached. respondent to acquire it in due course by indorsement. made on a separate paper to which it was pinned. it was necessary for hold the indorser liable as such. however. who now becomes the holder. indorsements that convenience or necessity required additional space for further indorsements.  The law requires the allonge to be attached to the 3. the use of allonge was allowable only when the to the defenses which may be existing between back of the instrument itself was so covered with previous the prior parties. Indorsement. thereto. 4. the indorsee or transferee  Complainant filed her bill for the cancellation of the 2) Signifies the agreement of the indorser to answer mortgage securing the joint negotiable note executed by her for the amount represented by the instrument in and her husband.  Transfer – broader term than negotiation. there Mitch De Ocampo | B2017 14 . is a sufficient indorsement. without additional words. the transfer is a mere assignment given rise to much conflict. which constitutes the transferee as a mere  The law makes no distinction. otherwise the transfer will not be acquired by the transferee may be different.  An instrument payable to bearer can be negotiated by  Bill of complaint was dismissed on the theory that the mere delivery. without notice of the infirmity charged. The signature of the indorser. The bill alleges that the money for which case of default of the maker or the party primarily the note and mortgage were given was lent to the husband liable and that her relation to the debt was that of a surety only. the note being payable to Thompson. an indorsement by the payee or present holder. to respondent was a purchaser for value in due course of the indorse a bearer instrument whenever it is transferred. or  Sec 4986 of the Code which states that “the indorsement 2) Where the indorsement is not made properly as must be written on the instrument itself or upon a paper required by law. There any room on the instrument for further will be a valid transfer in either case. Methods of negotiation instrument. or 1) Constitutes a transfer or sale of the instrument to order. 71  Indorsement – consists of the signature of the indorser usually on the back of the instrument. How Made. sufficient to constitute the transferee a holder. upon a slip of paper tacked assignment of the transferor’s rights and places or pasted on the instrument so as to become a part of it.A. et al. does not warrant that he will pay in case the primary party falls to pay. Thompson. although he assumes the liabilities of a seller or transferor of Issue: Whether there was allonge in this case [NO] the note or bill. As such. since he can complainant against the payee. and second. first.” negotiation.  Does not impair the negotiation but serves as an  In order to free the note of the defense available to additional security to the transferee.  Allonge – indorsement on a separate paper. attached thereto. subject  However. transferee or indorsee. Facts: [Sec 31. J. – The indorsement must be especially when there is space for indorsement on the back written on the instrument itself or upon a paper attached of the instrument itself. 31. but the rights indorsements.  If an instrument is transferred without  The question as to when an allonge may be valid has negotiation. Sec.” is but a statutory affirmation of the rule of the old law merchant which allowed indorsements to be  In these cases. the Court is constrained to treat the transfer as a common- otherwise than by a negotiation when: law assignment merely. its delivery to the Clark v Thompson. (1915) – Sommerville. subject to all defenses view follows the common law rule that an allonge existing among prior parties. NIL]  Respondent bought the note and mortgage from the payee. includes both an ordinary assignment and a negotiation. Ratio:  A transfer of a negotiable instrument is effected NO. p. It is common practice. it was held that a written transfer of a note.  One who negotiates by delivery. the respondent was not a holder 1) An order instrument is delivered by the payee or in due course.

c.” as a negotiation of the instrument. his proper signature. as directed by them. it may be negotiated for the balance. was an agreement by the will prima facie not be a valid indorsement of the defendant to loan money to plaintiff (the indorsee). If name misspelled 2) NO. or which purports to transfer the agreed to issue to him “some trust stock that would instrument to two or more indorsees severally.H. and not a commercial indorsement. Horn”  Where the instrument is payable to “A or B”. There is no evidence in the record to show that they are one and the same firm or legal entity. there was nothing on its face to indicate that payment has  Neither does the provision prohibit a transaction where the indorsee pays the indorser less than the face been stopped. 73 Sec. On its face. Faulkner Oil Trust as payee. pursuant to which the manner he was designated. 5. The Court ruled that it could not 1) NO. he may sign his plaintiff does not make any claim by reason of the correct name. evidently for  In order to be a holder in due course. And So Forth. –  A check is merely an order to pay money. J. in assuming liability. Either one may  The Court disagrees. but subject to the defenses that might  Where the instrument is payable or indorsed to “A and have been interposed against the payee. – The Facts: indorsement must be an indorsement of the entire instrument.  Discount is given in consideration of the period during which the purchaser has to wait before he Mitch De Ocampo | B2017 15 . it may be indorsed as to the residue. buys at a discount. misspelled. The maker and all the prior  The check. plaintiff brought this action. the indorsee. the plaintiff is not a holder in due course.  The indorsement should be made by the holder in the  The only contract in this case. unless the one what form the indorsement must take. claims that the signature “Horn & Faulkner. there is no splitting of the cause of favor. or where b.” the amount of the instrument has been paid. presume that such a superficial fastening. being room on the back of the note itself for the transfer. The defendant (maker of the check) now brings this action for it belongs wholly to the purchaser who appeal. 43. if he thinks fit. but adding. the is a sufficient indorsement of “Horn & Faulkner Oil Trust”. and the maker Where the name of a payee or indorsee is wrongly designated or has the right to stop payment.  Defendant orally agreed to loan Horn and Faulkner a sum of An indorsement which purports to transfer to the indorsee a part money “to help them out in some oil drilling. by L. This is called a “discount” of the instrument. he is not liable on the instrument itself. In case of joint payees there is no indorsement at all. The instrument. 32. transfer of the check to him.” and delivered to cause of action against them. plaintiff in payment for labor and materials furnished to  The provision does not cover a situation where part of “Horn & Faulkner Oil Trust.  The bank must respect the order stopping payment. Where the indorsement is not proved to be that of the payee. Sec. took the risk of only one indorsed “Horn & Faulkner. After such indorsement.” and they only of the amount payable. but rather claims that there is no absolute rule as to free the instrument from defenses. payees are merely in the alternative. title transferring to the  After two unsuccessful attempts to cash the check. but case. was then parties. An indorsement by either A  Here. Since the defendant stopped payment. the evidence does not show that the note 2) Whether the defendant is liable on the instrument itself [NO] was pinned to the mortgage when they were transferred to respondent. by L. in which  Plaintiff made no investigation regarding the check. Indorsement Where Name Is Misspelled. they are joint payees. that the check was indorsed by the payee. he may indorse the instrument as therein described. without being presented for payment. Young v Hembree (1937) – Hurst. otherwise the signature check was originally given. B”. where the instrument temporary convenience only. the indorsement is not validly negotiate the instrument. does not operate guarantee the repayment. still existed at the date of the is payable “to order”. The plaintiff also indorsing is authorized by the other.H. plaintiff takes not as an innocent purchaser. But where the instrument  Defendant then wrote a check and designated “Horn & has been paid in part. The stock was never delivered. Indorsement Must Be of Entire Instrument. the plaintiff does not question the correctness of this or B only will not constitute a valid negotiation so as to rule. was Issues: an assignment merely. Horn.  The defendant stopped payment on the check before it was  Purpose: protect the obligors from more than one presented to the bank. 1) Whether the plaintiff is a holder in due course [NO]  In the present case. that of the payee. the plaintiff must plead and prove transfer. that does not destroy the contractual liability that may exist between the maker and the payee. action on the instrument. Judgment was rendered in his  In this case. amount of the instrument. Indorsement must be of entire instrument p. but only when they were delivered to the payee Ratio: nearly a year before.

beneficiaries of the estate..  No reason appears why the misguided use of an indorsement form should put the purported indorsees  Special or blank – has to do with the future entirely outside the protection of the courts. Weiden long as he brought his co-assignees into the action. negotiable instrument transfers title with or without  Frank held five counterclaims on negotiable note (for $5K indorsement. and worded thus:” i.  In interpreting Sec 62. Weiden & Son.  The statement in Sec 62 that the indorsement does not appears.  Although the signature of the indorser is sufficient to  Sec 62. 103. and the rule against splitting causes of each) given by the bankrupt corporation to Robert Weiden.68. Kinds of indorsements 2) Whether a set-off may be effected [YES] Sec. Basis of classification instruments. as tenants in common. which purports to transfer to indorsee a part only of the amount payable. as trustee in bankruptcy of R. Share alike. – An indorsement may be either Ratio: special or in blank. such splitting is justified: themselves as executors. The rule against splitting does not forbid the use of part of a claim as a set-off. All indorsements are negotiated when it is transferred from one person to either special or in blank. action. the that when there has been a purported indorsement of the transfer is not necessarily void. 33. It does not put the purported indorsees entirely outside the protection of the courts. Weiden and brought. the Court said that the better rule is  When an instrument does not comply with Sec 32. (executors of Robert’s estate) “put on the back of each of  Even if the enforcement of the counterclaims involved a the notes a form of indorsement. Hermann J.  Plaintiff’s and defendant’s claim are mutual and defendant’s claim is by its nature one provable in Issues: bankruptcy. and it may also be either restrictive or 1) YES. in separate parts to two or more a mere assignment which subjects the holder to all transferees. Also. As such. whether by indorsement there was at least constructive delivery to the three and delivery or delivery alone. 1) Whether Frank had legal title to. the court necessarily  Frank sets up in his counterclaims his purported share of the concluded that he brings himself well within the Bankruptcy five notes as a set-off against the debt for which the trustee is Act requirements as to set-offs. the purported indorsees take legal title to their defenses on the instrument. but as whole instrument. conditional. parties. It remains valid. by splitting of the cause of action. J. method of negotiation. Weiden. can cash the instrument with the maker or would have taken title to the instrument or to the chose acceptor. An indorsement.” unconditional. and causes purported individual shares of the five notes as indorsees. and causes of action at law on. or any one or more may sue provided all the other indorsees are brought in as Blake v Weiden (1943) – Desmond. 76  The purpose of the restrictions embodied in Sec 62 was to prevent a multiplicity of suits. ii. another in such manner as to constitute the transferee qualified or unqualified. holder in other parts of the NIL. Blake. Frank’s father. Frank was a instruments. or added which may modify the rights of subsequent which purports to transfer the instrument to two or more holders or the liabilities if the indorser. Frank J. “operate as a negotiation” suggests that it is not entirely  Sec 33 does not mean that there is but one inoperative. and conditional or the holder thereof. of action at law on his share of the notes. Kinds of indorsements.  Charles and Hermann filed proofs of claims on their 2) YES.  Frank. had the right to maintain his counterclaim so bankruptcy. p. it seems that the intent of Sec 62 is only to deprive the several indorsees of the special rights which the Acts gives to “holders” of properly negotiated a. his share of the notes [YES] 6. Charles R. Weiden. Facts:  This interpretation of defendant’s rights leaves  John A. But where the instrument has been paid in classified into special. restrictive or non-restrictive. the transferees Mitch De Ocampo | B2017 16 . suing. The splitting was really done by the other two assignees who filed separate proofs as claims before this suit was Pay to the order of Charles R. the rule of Sec 79 that delivery of a stockholder in the bankrupt company. indorsees severally. sued Frank Weiden to recover an overdraft in defendant’s do not have the rights of “holders” of negotiable salary amount in the amount of $8. restrictive. Weiden and Hermann J. it may be indorsed as to the residue. signed by the estate. qualified and part. undisturbed the rule of Sec 62 that the several indorsees Inc. NIL: The indorsement must be an indorsement of constitute an indorsement.  The Court rejected the view that Sec 62 makes an  Blank indorsement – only the signature of the indorser indorsement a nullity. does not operate as a negotiation of the  Indorsements containing such additional words are instrument. Reading Sec 62 and Sec 60 with the references to the qualified or conditional. additional words may be the entire instrument. who died in 1937. several shares and may sue together. Sec 60 says that “an instrument is classification scheme involved. which can be done only at the maturity in action without any written words of transfer at all. Having held that defendant had legal title to. as co-assignee of a non-negotiable chose in  After Robert’s death and before the corporation’s action. of the instrument. In this case. retaining the rest for later use.

or to whose order. is liable to subsequent holders. Sec 40 however offers the opposite  If the indorser wants to relieve himself of either result. How Changed to Special character of the instrument. signature. 38. bearer and is specially indorsed thus: “Pay to X. 40. payable to bearer. the indorsement of the special  The transfer would still be a negotiation and the indorsee is necessary for the further negotiation transferee would still be a holder capable of of the instrument.  Restrictive or non-restrictive – has to do with the negotiation of such an instrument may be kind of title transferred. By  This apparent conflict can be settled by applying adding the words “without recourse” above his Sec 40 only to originally bearer instruments. negotiability as long as these appear on the face This does not mean. – A special into an order instrument by a subsequent special indorsement specifies the person to whom. It may be made by adding to the indorser’s make title through indorsement. and the indorsement of such controlling the means of further negotiation. Blank Indorsement.  A person who negotiates by mere delivery is liable  In the absence of clear and unmistakable only to his immediate transferee. p.  Conditional or unconditional – has to do with the  A blank indorsement may be converted into a presence or absence of express limitations put by special indorsement by writing over the signature the indorser upon the primary obligor’s privileges of the indorser in blank any contract consistent of paying the holder. is indorsed specially. Special and blank indorsements converted into a bearer instrument by means of a blank indorsement. those who take title through his indorsement. but the person constitutes the indorser a mere assignor of the title to the indorsing specially is liable as indorser to only such holders as instrument.  An instrument payable to order on its face may be b. he expressly rids himself of his second contract. unless the instrument is an originally bearer instrument. however.  In either case. and may be notwithstanding an indorsement. An indorsement in blank specifies no indorsee. followed by the signature of the indorser. Qualified indorsement Sec. (sgd. with the character of the indorsement. Qualified Indorsement. contract. it is a blank indorsement. he must do so in clear and express terms. an indorser will be indorser. is X’s signature necessary for the further relieve the qualified indorser of his liability to pay negotiation of the instrument? the instrument should the maker be unable to  Sec 34 taken alone would seem to answer in the pay at maturity. 1) A contract of sale or assignment of the instrument  Two forms of special indorsement: “Pay X” or “Pay X or 2) A contract to pay the instrument if the maker is order”. merely the rights of an assignee.  An indorsement need not contain the words of  A qualified indorser merely assumes the first contract. Special Indorsement. an instrument payable to bearer instrument. 35. acquiring a title free from defenses of prior  Suppose that an instrument is on its face payable to parties. indorsement. – The holder may convert a blank indorsement into a special indorsement by writing over the signature of the  An indorser by his indorsement impliedly enters into indorser in blank any contract consistent with the character of two contracts: the indorsement. 34. liable on both his contracts. effected by mere delivery regardless of whether  Qualified or unqualified – lies in the scope of the the instrument is on its face payable to bearer or liability assumed by the indorser. and may later be reconverted Sec. – A qualified indorsement nevertheless be further negotiated by delivery. Such an indorsement does not impair the negotiable Sec. in which case he is liable only to Fay v Witte (1933) – Crane. the last indorsement always the instrument is to be payable. J. not. c. and on its face always remains a bearer instrument an instrument so indorsed is payable to bearer. however. The further Mitch De Ocampo | B2017 17 . Words of similar import would include “sans  Rules: recourse” or “at indorsee’s own risk”.)  The only effect of the qualified indorsement is to Y”. Indorsement of Instrument Payable to Bearer. On indorsee is necessary to the further negotiation of the the other hand. Indorsement. A special language qualifying liability. 85  Where only the signature of the indorser appears with no indication of the person to whom it is Facts: payable. signature the words “without recourse” or any words of similar import. negotiated by delivery. it may Sec. affirmative. that the transferee has of the instrument. – Where an instrument. unable to pay on maturity. Indorsement in Blank.

Issue: Sec. – Where an indorsement is conditional. where the form of the indorsement authorizes him to do so. J. (1916) – Edwards. or may deposit it to his credit either in the drawee bank or in another bank/ Sec. no subsequent holder can acquire any 2) That should the latter fail to pay on such right in the instrument antagonistic to the right of presentment. negotiability of the instrument because the p.  Illustrations. (b) To bring any action thereon that the indorser could bring. When Indorsement Restrictive. subject 7. the rights of Y. to the use of some other person. Facts: Sec. p. some other person.” This prohibits entirely the further negotiation of the instrument.  A holder of a check may either cash it with the drawee e. d. for collection. 88 (c) To transfer his rights as such indorsee. and however. 37. 3) “Pay to X for Y’s use” is a restrictive indorsement  The aforementioned conditions are implied in every which vests the title of the indorsee in trust for or contract of indorsement and need not be expressed. Mitch De Ocampo | B2017 18 . Rights of Indorsee. Effect of Restrictive Indorsement.  Such an indorsement does not affect the White v National Bank (1880) – Miller. Conditional indorsement 2) “Pay to X for collection” is a widely used form of restrictive indorsement and constitutes the  An indorser is liable to pay the instrument on two indorsee an agent to collect in behalf of the conditions: indorser. three classes of restrictive indorsements: Ratio: 1) “Pay to X only. X may receive payment on the 1) That due demand or presentment be made on the instrument and may sue thereon in his own name.  Such additional condition must be express. 91  In the latter case although the instrument may be Facts: further negotiated. et al. or than the drawee. X may receive  An indorsement without any other condition upon payment on the instrument and may sue thereon which liability is based is referred to as an but whatever he collects he holds in trust for Y. a party required to pay the instrument may Issue: disregard the condition. sent to the indorser. 97 original promise or order remains unconditional. all subsequent indorsees take subject to the rights of the restrictive indorser or Issue: the third person. Facts: But all subsequent indorsees acquire only the title of the first indorsee under the restrictive indorsement. a notice of dishonor be promptly the first restrictive indorser. Issue:  Restrictive indorsement – either restricts the right of Ratio: the indorsee to further negotiate the instrument or reserves beneficial interest therein in the indorser or in Hutson v Rankin (1922) – Budge. Conditional Indorsement. p. A conditional may negotiate the instrument but subsequent indorsement is one where an additional condition is holders cannot acquire rights which will defeat annexed to the indorser’s liability. or the proceeds thereof. C. – A Ratio: restrictive indorsement confers upon the indorsee the right: (a) To receive payment of the instrument. J. as the case may be. or check to such bank. since he would have to indorse the (c) Vests the title in the indorsee in trust for or to the use of check before the bank will accept it for deposit. Indorsement to or by collecting bank to the rights of the person indorsing conditionally. Ratio: But any person to whom an instrument so indorsed is negotiated. 36. party primarily liable on the date of maturity. Restrictive indorsement bank. whether the condition has been fulfilled or not. Copeland v Burke. he unconditional or absolute indorsement. and make payment to the indorsee or his transferee. – An indorsement is restrictive. a third person.  If the indorsement is “for collection” → restrictive indorsement where the bank is merely an agent But the mere absence of words implying power to negotiate does not make an indorsement restrictive. he would in effect be negotiating the (b) Constitutes the indorsee the agent of the indorser. will hold the same. 39. which either:  Where the holder deposits the check with a bank other (a) Prohibits the further negotiation of the instrument.

Striking Out Indorsements. instrument as a legal owner thereof. cannot be considered a “holder” of the instrument. Negotiation by joint or alternative payees or indorsees Facts: Sec. – Except where an p. 41. otherwise he may be held  Gratuitous transferee has a right to sue on an personally liable. Mitch De Ocampo | B2017 19 .  Where the instrument is payable to order in its face. Pres. but he liability. 109 indorsement bears date after the maturity of an instrument. the right to have the indorsement of the transferor. 44. may become a holder by  The authority of agent need not be in writing. then all of when the indorsement is actually made. – Where any unindorsed instrument acquires such. the But for the purpose of determining whether the transferee is a situation is different. Presumption. If all the indorsements appearing holder in due course. J. who holder of an instrument payable to his order transfers it for value is presumptively the owner by mere possession. then whether or not there are indorsements on the back of Sec. – Where the the instrument would be immaterial. J. – Where an instrument is payable to the order of two or more Issue: payees or indorsees who are not partners. them would be necessary to the holder’s title. and the transferee acquires. he may indorse in such terms as to negative personal parties. right to cancel any or all indorsements. has a without indorsing it. 12. p. 48. every negotiation is deemed prima facie to have been effected Facts: before the instrument is overdue. Effect of. in addition. obtaining the indorsement of his transferor. Sec. Ratio:  If the joint payees or joint indorsees are partners. Indorsement in Representative Capacity. the negotiation takes effect as of the time on the back of the instrument are special. unless the one indorsing has authority for the others. 113 Hagarty. 114 8. Indorsement by agent the transferor. the payee. The holder. The indorser whose indorsement is struck out and all indorsement by each of them. 45. as can be gleaned from deposit slips that usually state that the bank is a Ratio: mere collecting agent. Indorsement Where Payable to Two or More Persons. Bank of Roseburg (1919) – Harris. then 10.  A holder must be able to trace his title to the instrument back to the original owner.  If the indorsement states “for deposit” → Issue: restrictive indorsement. and thus effect a valid indorsers subsequent to him are thereby relieved from liability negotiation. CJ p. the transferee of an Sec. Cancellation of indorsements the indorsement by one of the partners of his own name and that of his partner. 102 Facts: Facts: Issue: Issue: Ratio: Ratio: Whistler v Forster (1863) – Erle.  If his predecessor had legal title. He has a right to sue in his own name. but does not have the right to compel the indorsement of his donor. 49.  Agent should make it plain that he is merely signing in behalf of the principal. may constitute an title. cannot apply to bearer instruments.  Presumes that a person signing has authority to sign his partner’s name. subject however person is under obligation to indorse in a representative to the defenses and equities available among prior capacity. Furbee v Furbee (1936) – Hatcher. Unindorsed instruments  If the instrument is payable to bearer on its face. Transfer Without Indorsement. the transfer vests in the transferee such title as the transferor had therein.  Applies only to an instrument payable to the order of 11.  The transferee however. who is a co-payee or Sec. on the instrument. – The holder may at any time strike out any indorsement which is not necessary to his joint indorsee with him. Leonardi v Chase National Bank of the City of New York (1942) – p. Presumption as to indorsements Simpson v First Nat. all must indorse. 9. Time of Indorsement.

Continuation of Negotiable Character. – An instrument negotiable in its origin continues to be negotiable until it has been restrictively indorsed or discharged by payment or otherwise. Mitch De Ocampo | B2017 20 . – Where an instrument is drawn or indorsed to a person as “cashier” or other fiscal officer of a bank or corporation. Continuation of negotiable character Sec.  The words “corporation” in Sec 42 does not include cities and towns and confers no authority upon the town treasurer to impose upon his town the liability of an indorser.Sec. thus subjecting him to defenses. 13.  Although indorsements after maturity are good to transfer title. 42. – Except where the contrary appears. Presumption.  Law of the place of dating will govern any controversy should there be a conflict of laws. Effect of Instrument Drawn or Indorsed to A Person As Cashier. every indorsement is presumed prima facie to have been made at the place where the instrument is dated. Place of Indorsement. it is deemed prima facie to be payable to the bank or corporation of which he is such officer and may be negotiated by either the indorsement of the bank or corporation. or the indorsement of the officer. they prevent a holder from becoming a holder in due course. Sec.  Presumption that every negotiation was effected before the instrument was overdue is significant since indorsements are usually not dated.  The fact that the instrument is overdue does not affect the right of the holder to further negotiate it if he wishes to. if any. 46. 47. but merely prejudices the status of subsequent holders as they cannot be considered holders in due course.