Negotiable Instruments Law
NEGOTIABILITY
REQUISITES (SUDOC)
1. in writing and signed by maker or drawer
2. unconditional promise or order to pay
a. with exchange, whether at a fixed rate or at
the current rate,
b. with costs of collection or an attorney’s fee, in
case payment not made at maturity
3. payable on demand,
or at a fixed or determinable future time
4. payable to order
or bearer,
5. where addressed to drawee: such drawee
named/ indicated therein with reasonable
certainty
CONSIDERATION
PROMISSORY NOTE
BILL OF EXCHANGE
CONTINUATION OF NEGOTIABLE CHARACTER
Until:
1. restrictively indorsed
2. discharged by payment or otherwise
EFFECT OF ADDITIONAL PROVISIONS
(Sec.5) Gen. Rule: order/promise to do any act in
addition to the payment of money renders
instrument non-negotiable.
Exception: negotiability not affected by provisions
Other Instances when negotiability not affected
(Sec. 6)
Sec. 17. Construction where instrument is
ambiguous.
DELIVERY (Sec. 16)
Issuance-the first delivery of the instrument
complete in form to a person who takes it as a holder.
Steps:
1. Mechanical Act of writing, complying with
requirements of Sec. 1
2. Delivery with intention to give effect thereto.
*Lim vs. CA G.R. 107898 December 19, 1996
*Lim vs. Rodrigo G.R. 76974 November 18, 1988
*People vs. Grospe GR L-74053-54, 20 January
1988
*Development Bank of Rizal vs. Sima Wei [GR
85419, 9 March 1993]
*Morillo vs. People of the Philippines Dec. 9, 2015
PRESUMPTION OF DELIVERY
Where the instrument is no longer in the possession
of a party whose signature appears thereon, a valid
and intentional delivery by him is presumed until the
contrary is proved (*if in the hands of a HDC,
presumption conclusive)
1
NEGOTIATION
*Sesbreno vs. Court of Appeals [GR 89252, 24 May
1993]
VS ASSIGNMENT
* Caltex Phil. Vs CA 212 SCRA
INDORSEMENT
KINDS OF INDORSEMENT
A. As to manner of future method of negotiation
B. As to kind of title transferred
C. As to kind of liability assumed by indorser
D. As to presence/absence of express limitations put
by indorser upon primary obligor’s privileges of
paying the holder
Liability of Accomodation Party
• Definition: one who signed instrument as
maker/drawer/acceptor/ indorser w/o receiving
value thereof, for the purpose of lending his name to
some other person
• Accomodation Party liable on the instrument to
holder for value even if holder, at time of taking
instrument, knew he was only an Accomodation
Party
*Ang Tiong vs. Ting G.R. L-26767 February 22,
1968
*Crisologo-Jose vs. Court of Appeals [GR 80599, 15
September 1989]
HOLDER IN DUE COURSE (memorize)
REQUISITIES
1. complete and regular upon its face
2. holder became such before it was overdue,
without notice of any previous dishonor
3. taken in good faith and for value
4. at time negotiated to him, he had no notice of
--
a.infirmity in instrument
b.defect in title of person negotiating:
*Bataan Cigar and Cigarette Factory vs. CA G.R.
93048 March 1994)
*De Ocampo vs. Gatchalian [GR L-15126, 30
November 1961]
*Stelco Marketing Corp. vs. Court of Appeals [GR
96160, 17 June 1992]
*Yang vs. Court of Appeals [GR 138074, 15 August
2003]
*State Investment House vs IAC July 13, 1989
* Salas vs. CA Jan. 22, 1990
RIGHTS OF HOLDER IN DUE COURSE
RIGHTS OF PURCHASER FROM HOLDER IN DUE
COURSE
DEFENSES
1. INCAPACITY: REAL: indorsement/assignment
by corporation/infant passes property but
corp/infant no liability
2. FORGERY: Real:
 Negotiable Instruments Law 2

Definition: the counterfeit-making or fraudulent
alteration of any writing, and may consist in the
signing of another’s name or the alteration of an
instrument in the name, amount, description of the
person and the like, with intent thereby to defraud.
Bad Forgery—forgery which is apparent or naked to
the eye
Good Forgery—requires examination of signature if
it was forged
Effect when Signature is forged or made without
authority of person whose signature it purports to be.
General Rule:
a. wholly inoperative
*Philippine National Bank vs. Court of Appeals [GR
107508, 25 April 1996]
4. FRAUD
a. fraud in execution: real defense (didn’t know it
was a Negotiable Instrument)
b. fraud in inducement: personal defense (knows
it’s Negotiable Instrument but deceived as to
value/terms)
5. COMPLETE, UNDELIVERED INSTRUMENT
• Personal defense (sec. 16)
• If instrument not in possession of party who
signed, delivery prima facie presumed
• If holder is HDC, delivery conclusively presumed

b. no right to retain instrument, or give discharge, or 6. INCOMPLETE, UNDELIVERED INSTRUMENT

enforce payment vs. any party, can be acquired • Real defense (sec. 15)
through or under such signature (unless forged • Instrument will not, if completed and negotiated
signature unnecessary to holder’s title) without authority, be a valid contract in the hands of
any holder, as against any person whose signature
Exception: was placed thereon before delivery
unless the party against whom it is sought to enforce  Samson Ching vs. Nicdao G.R. no. 141181
such right is precluded from setting up forgery/want 2007
of authority
7. INCOMPLETE, DELIVERED
Precluded: • Personal defense (sec. 14)
a. parties who make certain warranties, like a
general indorser or acceptor • 2 Kinds of Writings:
b. estopped/negligent parties 1. Where instrument is wanting in any material
particular: person in possession has prima facie
*Associated Bank vs. CA G.R. 107382 January 31, authority to complete it by filing up blanks therein
1996 2. Signature on blank paper delivered by person
*Gempesaw vs. CA G.R. 92244 February 9, 1993 making the signature in order that the paper may be
*MWSS vs. CA G.R. L-62943 July 14, 1986 converted into a NI: prima facie authority to fill up as
*Philippine Commercial International Bank vs. CA such for any amount
GR 121413, 29 January 2001
*Republic Bank vs. CA GR 42725, 22 April 1991 • In order that any such instrument, when
*Republic Bank vs. Ebrada GR L-40796, 31 July completed, may be enforced against any person who
1975 became a party thereto prior to its completion:
* Samsung Const’n vs. Far East Bank Aug. 15, 2003 1. must be filled up strictly in accordance w/
*Mesina vs. CA Nov. 13, 1986 authority given
*PNB vs. Quimpo March 14, 1988 2. within a reasonable time
*Ilusorio vs. CA Nov. 27, 2002 • but if any such instrument after completion is
negotiated to HDC, it's valid for all purposes in his
3. MATERIAL ALTERATION hands, he may enforce it as if it had been filled up
• Where NI materially altered w/o assent of all properly
parties liable thereon, avoided, except as against
1. party who has himself made, authorized or Real Defenses Personal Defenses
assented to alteration 1. Material Alteration 1. Absence or failure of
2. and subsequent indorsers 2. Want of delivery of consideration whether
incomplete partial or total
• But when an instrument has been materially altered instrument 2. Want of delivery of
and is in the hands of a HDC not a party to the 3. Duress amounting to complete instrument
alteration, HDC may enforce payment thereof forgery 3. Insertion of wrong
according to orig. tenor 4. Fraud in factum or date in an instrument
Fraud in esse 4. Filling up of blank
*material alteration a personal defense when used contractus contrary to authority
to deny liability according to org. tenor of instrument, 5. Minority (available given or not w/in
but real defense when relied on to deny liability to the minor only) reasonable time
according to altered terms. 6. Marriage in the case 5. Fraud in inducement
of a wife 6. Acquisition of
*Hongkong and Shanghai Bank vs. People’s Bank 7. Insanity where the instrument by force,
and Trust G.R. 28226 September 30 1970 insane person has a duress or fear
 Negotiable Instruments Law 3

guardian appointed 7. Acquisition of

by the court instrument by unlawful 2. In BILLS OF EXCHANGE
8. Ultra Vires acts of means - In bills of exchange, where the bill is presented for
corporation 8. Acquisition of the acceptance and is returned dishonored, or within
9. Want of authority of instrument for an illegal twenty four hours from presentment, is not returned
agent consideration accepted or unaccepted, or when presentment for
10. Execution of 9. Negotiation in breach acceptance is excused and the bill is not accepted
instrument b/w of faith there is a dishonor by non-acceptance.
public enemies 10. Negotiatio -There is a dishonor by non-payment if the bill,
11. Illegality—if n under circumstances after it has been accepted is not paid when presented
declared void for that amount to fraud for payment, or presentment being excused, is not
any purpose 11. Mistake paid on the date of maturity.
12. Forgery 12. Intoxicatio
n Effect of Dishonor by Non-acceptance: An
13. Ultra Vires immediate right of recourse against the drawer and
Acts of corporations indorsers accrues to the holder and NO
where the corporation PRESENTMENT for payment is necessary. (Sec. 151)
has the power to issue
negotiable paper but the  NOTICE OF DISHONOR
issuance was not --bringing either verbally or by writing, to the
authorized for the knowledge of the drawer or indorser of an
particular purpose for instrument, the fact that a specified negotiable
which it was issued instrument, upon proper proceedings taken, has not
been accepted or has not been paid and that the party
notified is expected to pay it.
 PRESENTMENT REQUISITES:
*Elvira Yu Oh vs. Court of Appeals G.R. no. 125297
REQUISITES OF ACTUAL ACCEPTANCE: June 6, 2003.
*Lim Lao vs. C.A. G.R. 119178 June 20, 1997
EFFECT OF ACCEPTANCE: *Campos vs. People of the Philippines Sept. 17,
2014
 Presentment for Acceptance *Besterio vs. People of the Philippines Sept. 24,
Definition: It is the production or exhibition of a 2012
bill of exchange to the drawee for his acceptance. *Nissan Gallery-Ortigas vs. Felipe Nov. 11, 2013

GENERAL RULE: CHECK – is a bill of exchange drawn on a bank

Presentment for acceptance is NOT NECESSARY to
render any party to the bill liable.
 Presentment For Payment Of Accepted Bill
Purpose: The purpose of presentment for payment
of an accepted bill is to collect from the acceptor; and
if refused, to collect from the secondary parties.
*Far East Realty Investment Inc. vs. Court of
Appeals [GR L-36549, 5 October 1988]
*Wong vs. Court of Appeals [GR 117857, 2
February 2001]
*The International Corporate Bank (now Union
Bank of the Philippines) vs. Spouses Gueco
[GR141968, 12 February 2001]
payable on demand. It is a written order on a bank,
purporting to be drawn against a deposit of funds for
the payment of all events, of a sum of money to a
certain person therein named or to his order or to
cash and payable on demand.
*Tibajia vs. CA GR 100290, 4 June 1993
*Philippine Airlines vs. Court of Appeals [GR
49188, 30 January 1990]
Kinds of checks:
*Tan vs. CA GR 108555, 20 December 1994
*Co vs. PNB G.R. L-51767 June 29, 1982
*Intl Corp Bank vs Gueco Feb 12, 2001
* People vs. Nitafan Oct. 22, 1992
*Associated Bank vs. CA G.R. 89802 May 7, 1992

 DISHONOR B.P. 22 cases:

1 .In PROMISSORY NOTE
- In a promissory note, dishonor by non-payment
takes place when it is duly presented for payment
and payment is refused or cannot be obtained; or if
presentment is excused, the instrument is overdue
and unpaid.
Effect: There is an immediate right of recourse by the
holder against persons secondarily liable, which
requires notice of dishonor (Sec. 84)
* Caram Resources vs. Contreras AM MTJ 0830849
October 26, 1994
* Cruz vs. CA G.R. 108738 June 17 1994
* Lim vs. People G.R. 130038 September 18, 2000
* Llamado vs. CA G.R. 99032 march 26, 1997
* Moran vs. CA G.Rno. 105836 March 7, 1994
* State Investment House vs. CA GR 101163, 11
January 1993