QUESTION 1:

Den, draws a bill in favor of Peter or order with West as drawee, and Ana, Ben,
and Claire as successive indorsers, and Henry as holder. Henry demanded
payment of the bill from Den, and Henry protested non-payment. Here comes,
Terrence offering to pay for the honor of Claire, and another man, Roxy offered
to pay for honor in favor of Ana. Who among the payers for honor must be
chosen? Why?

ANSWER:
Roxy must be preferred as the payer for honor in the case at bar. According to
Section 174, the payer for honor whose payment shall discharge most parties is
given preference. Since Roxy, offered to pay for the honor of Ana, with the effect
of discharging Ben and Claire, then, Roxy is preferred over Terrence whose
payment will only discharge Claire.

QUESTION 2:
For the purpose of lending his name without receiving value therefor, Raquelita
makes a note for P30,000.00 payable to the order of Virginia who in turn
negotiates it to Romnina, the latter knowing that Raquelita is not a party for value.
May Romnina recover from Raquelita if the latter interposes absence of
consideration?

ANSWER:
Yes. Romnina can recover from Raquelita. An accommodation party is one who
has signed the instrument as maker, drawer, acceptor or indorser, without
receiving for value therefor, and for the purpose of lending his name to some
other person. Such a person is liable on the instrument to a holder for value,
notwithstanding such holder at the time of taking the instrument knew him to be
ONLY an accommodation party [Section 29, NIL]. Furthermore, absence of
consideration between the accommodation party and accommodated party
does NOT of itself constitute a valid defense against a holder for value even
though he know of it when he became a holder.

QUESTION 3:
X makes a promissory note for P10, 000 payable to A, a minor, to help him buy law
books. A endorses the note to B for value, who in turn endorses the note to C. C
knows A is a minor. If C sues X on the note, can X set up the defenses of minority
and lack of consideration?

ANSWER:
Yes. C is not a holder in due course. Under the Negotiable Instruments Law, a
promissory note is not a negotiable instrument if it does not contain any word of
negotiability, that is, order or bearer, or words of similar meaning or import.
Accordingly, the transferee merely steps into the shoes of the transferor and,
being merely a successor-in- interest, has no right greater than that of the
transferor. Not being a holder in due course, C is to subject such personal
defenses of minority and lack of consideration.

QUESTION 4:
An instrument is indorsed as follows, “Pay to A, for B” (Sgd.) C. Then A indorsed the
instrument “Pay to D” (Sgd.) A, in payment of A’s personal loan to D, the
instrument was accepted by D as indorsed by A. Is D acting in good faith when
he accepted the instrument as indorsed?

ANSWER:
No, because D knew by prior indorsement that A is merely a trustee for B and has
no right to negotiate the instrument.
QUESTION 5:
The instrument contains the words "I promise to pay" and is signed by both Ralph
and Don. Blessy negotiated the instrument to Angel. How much can Angel collect
from Ralph?

ANSWER:
Angel may collect ₱10,000.00 from Ralph.
Under Negotiable Instruments Law, Section 17(g) where an instrument containing
the word "I promise to pay" is signed by two or more persons, they are deemed to
be jointly and severally liable thereon.
In the case at bar, both Ralph and Don signed the instrument containing the
phrase "I promise to pay". Thus, under Section 17(g) of NIL, Angel may demand
from either Ralph or Don the full amount of the instrument.

QUESTION 6:
Noy, a client of yours is asking you for advice on how to make a payment for
honor in favor of his friend, Digs, what would be your advice?

ANSWER:
I would advise him that
1) He or his agent should go to a notary public and declare the intention to
pay the bill and for whose honor he pays.
2) The notary then records the declaration in the protest or in a separate
paper attached to it.
3) He should notify Digs, the person for whose honor he pays within
reasonable time.
If these formalities are not followed, the payment will operate as a mere voluntary
payment and that he would only acquire the rights stated in Articles 1236 to 1237
of the NCC and not those stated in Section 175.
QUESTION 7:
Jose issued to Juan a check worth 50,000 pesos as a payment for a 2nd hand car.
Without the knowledge of Jose, Juan changed the amount to 150k which
alteration could not be detected by the naked eye. Juan deposited the altered
check to BPI which forwarded the same to BDO for payment. BDO without
noticing the alteration, debiting 150k from the account of Jose. Juan withdrew
the amount of 150k from BPI and disappeared. After receiving his bank statement,
Jose discovered the alteration and demanded restitution from BDO. Discuss fully
the rights and liabilities of the parties concerned.

ANSWER:
The demand of Jose for restitution of the amount of 150k to his account is tenable.
BDO has no right to deduct said amount from Jose's account since the order of
Jose is different. Moreover, BDO is liable for negligence of its employees of not
noticing the alteration which, though it cannot be detected by the naked eye,
could be detected by a magnifying instruments used by tellers.
As between BDO and bpi, it is BDO that should bear the loss. BDO failed to notify
bpi that there was something wrong with the check within the clearing hour rule
of 24 hrs.

QUESTION 8:
Elsa purchased Anna’s car for P850,000.00. Not having enough cash on hand, Elsa
offered to pay in check. Anna refused to accept the check unless it is indorsed
by Kristoff, their mutual friend. Kristoff indorsed Elsa’s check and Anna, knowing
that Kristoff had not received any value for indorsing the check, accepted it. The
next day, Anna presented the check to the drawee bank for payment. Payment
was refused for lack of funds. Anna gave notice of dishonor to Kristoff, but Kristoff
refused to pay, saying that he indorsed merely as a friend. Is Kristoff liable to
Anna?
ANSWER:
Yes. Kristoff is liable to Anna. An accommodation party is one who has signed the
instrument as maker, drawer, acceptor or indorser, without receiving for value
therefor, and for the purpose of lending his name to some other person. Such a
person is liable on the instrument to a holder for value, notwithstanding such
holder at the time of taking the instrument knew him to be only an
accommodation party [Section 29, NIL].

QUESTION 9:
Lai issued a negotiable promissory note to Angel and authorized the latter to fill
up the amount in blank with his loan account in the sum of P1,000.00. However,
Angel inserted P4,000.00 in violation of the instruction. She negotiated the note to
Blessy who had knowledge of the infirmity. Blessy, in turn, negotiated said note to
Gorge for value and who had no knowledge of the infirmity. Can Gorge enforce
the note against Lai, and if she can, for how much?

ANSWER:
Yes. Gorge can enforce the Negotiable Promissory Note against Lai in the amount
of P4,000.00. Gorge is a holder in due course and the breach of trust committed
by Angel cannot be set up by Lai against Gorge. As holder in due course, Gorge
is not subject to personal defense.

QUESTION 10:
Don delivers a bearer instrument to Don. Don then specially indorses it to Khim,
and Khim later indorses it in blank to Hans. Ralph steals the instrument from Hans
and, forging the signature of Hans, succeeds in “negotiating” it to Jay who
acquires the instrument in good faith and for value. In case of the dishonor of the
check by both the drawee and the drawer, can Jay hold Don, Khim and Hans
liable secondarily on the instrument?
ANSWER:
Only Don and Khim can be held liable by Jay. The instrument at the time of the
forgery was payable to bearer, being a bearer instrument. Moreover, the
signature was indorsed in blank by Khim to Hans. Hans, whose signature was
forged by Ralph cannot be held liable by Jay.