Nego Pre Finaltranscript Feb 2014 TRWE PDF

Negotiable Instruments Law Pre-finals Transcript. For Personal Use Only.
LIABILITY OF MAKER — The maker of a negotiable instrument by making it engages that he will pay it according to its tenor, and admits the
existence of the payee and his then capacity to indorse. [60]
What is the engagement made by the maker in making the instrument?
The maker engages that he will pay it according to its tenor.pr
What are the admissions made by the maker in making the instrument?
He admits the existence of the payee and his then capacity to indorse.
Who has this capacity to indorse in that admission made by the maker?
The payee.
A makes a note in the amount of P1 million. Subsequently the note was transferred from A to B to C to D to E. During the said transfer, there
was an alteration as to the amount. P1 million becomes P10 million and the same is now in the hands of a holder in due course, F. What is the
engagement on the part of the maker?
A, maker, engages to pay P10million as the engagement of the maker is to pay absolutely according to its tenor.
Is the liability of the maker primary?
Yes, the maker’s liability is primarily and unconditional.
Why is his liability primary?
Because by engaging to pay it according to its tenor, the maker binds himself to be primarily liable on the said instrument.
What is the liability of two or more makers?
Each of them is individually liable for the payment of the full amount of their obligation even if one of them did not receive part of the value given
therefor, as he would be considered an accommodation party.
If they signed jointly and severally, what is their liability?
They are solidarily liable, i.e., each of them is liable for the whole amount subject to reimbursement. (NCC)
What if the tenor of the liabilities of the parties is not expressed in the said note?
The are jointly liable only because under the New Civil Code, joint and several liability cannot be presumed, it must be expressly stipulated.
A made a note payable to the order of Lapu-lapu. Coincidentally, the note came into the hands of someone named Lapu-lapu, who wanted to
enforce the instrument against A. May A refuse payment on the ground that Lapu-lapu is just a product of his wild imagination?
No, A is precluded from setting up the defense that the payee is a fictitious person because by making the note, A admits the existence of the
payee.
What if Lapu-lapu turned out to be only fifteen (15) years old and he indorse it to C. Can A, as maker, raise it as a defense that Lapu-lapu cannot
indorse the instrument against C and therefore, there was no valid transfer because Lapu-lapu was a minor at that time?
No, A, as maker is precluded from setting up the defense that the payee is a minor because by making the note, he admits the then capacity of the
payee to indorse.
LIABILITY OF DRAWER — The drawer by drawing the instrument admits the existence of the payee and his then capacity to indorse; and engages
that on due presentment the instrument will be accepted or paid, or both, according to its tenor, and that if it be dishonored, and the necessary
proceedings on dishonor be duly taken, he will pay the amount thereof to the holder, or to any subsequent indorser who may be compelled to
pay it. But the drawer may insert in the instrument an express stipulation negativing or limiting his own liability to the holder. [61]
By signing a bill what is deemed admitted by the drawer?
The drawer admits the existence of the payee and his then capacity to indorse
Is the drawer primarily liable?
No, because drawer does not engage to pay the bill absolutely.
What is the engagement made by the drawer upon signing the bill?
The drawer engages:

1) that on due presentment the instrument will be accepted or paid, or both, according to its tenor,
2) that if it be dishonored, and the necessary proceedings on dishonor be duly taken, he will pay the amount thereof to the holder, or to any
subsequent indorser who may be compelled to pay it.
"I never give something which was never discuss." - BEAST PAGE 1
To whom is the drawer considered secondarily liable?
The drawer is secondarily to:

1) the holder
2) any of the subsequent indorsers who is compelled to pay by the holder.
Give an example:
A draws a bill against X, as drawee payable to B or order. B negotiates to C, C to D, D to E, and E to F.
1) A, drawer is liable to F, holder, if X dishonors the bill either by non-acceptance or non-payment and the necessary proceedings of dishonor are
duly taken.
2) If D, a subsequent indorser, is made to pay F, holder, D can recover what he has paid F from A, drawer.
Technically, when do you consider the drawer secondarily liable?
The drawer becomes secondarily liable only after acceptance. Thereafter, the burden of paying the bill is already passed on to the acceptor.
Prior to drawee’s acceptance After drawee’s acceptance

Person primarily liable: Drawer Drawee
Person secondarily liable: Drawer
SIR: A, drawer, B, payee, C, drawee. When a drawer issues a bill, primarily he is the debtor. In order to pay his obligation, he delivers a bill to B, the
payee. In effect, A is indebted to B. Prior to the acceptance on the part of C, the person primarily liable is A, the drawer. C is merely a third person
in the transaction between A and B, and C is not a liable. Once C, the drawee, accepts the said bill from the payee, the drawee now becomes the
acceptor and there is a change in the rights and obligations of the parties. However, under Section 61 of your NIL, regardless of whether or not
there is an acceptance on the part the drawee, the law considers the drawer as secondarily liable. In its technical sense, prior to the acceptance on
the part of the drawee, it is the drawer who is primarily liable because he is the one indebted to the payee.
May the drawer include in the bill a statement like “I shall not be liable in case of payment or non-acceptance”?
Yes, the law allows the drawer to negative or limit his liability to the holder by express stipulation.
Will it affect the negotiability of the instrument?
No because all the requisites of Section 1 of the NIL are present
Which element of Section 1 is appropriate in our study of Section 61?
Where the instrument is addressed to a drawee, he must be named or otherwise indicated therein with reasonable certainty.
LIABILITY OF ACCEPTOR — The acceptor by accepting the instrument engages that he will pay it according to the tenor of his acceptance; and
admits —
(a)The existence of the drawer, the genuineness of his signature, and his capacity and authority to draw the instrument; and
(b)The existence of the payee and his then capacity to indorse. [62]
What is the engagement made by the acceptor?
The acceptor engages that he will pay it according to the tenor of his acceptance.
What are the admission of an acceptor when he signs as an acceptor of a bill?
The acceptor admits:

1) the existence of the drawer, the genuineness of his signature, and his capacity and authority to draw the instrument; and
2) the existence of the payee and his then capacity to indorse.
What is the liability of the acceptor?
The acceptor is primarily liable because he engages to pay absolutely according to the tenor of his acceptance.
Who is acceptor?
An acceptor is a drawee who accepts the bill and engages to pay absolutely according to the tenor of his acceptance.
Is an acceptor a party to the instrument?
Prior to his acceptance of the instrument, a drawee is not a party to the instrument. However, once a drawee accepts the instrument by affixing his
signature, he becomes an acceptor who is primarily liable on the instrument.
To whom is the acceptor liable?
He is liable to the payee or his indorsee and also to the drawer himself.
X drew a bill payable to Y the amount of P1 million. A is the drawee. A accepted the bill indicating therein that he will pay P100,000. Upon
presentment for payment, may a holder require A to pay the whole amount of P1 million?
No because an acceptor engages to pay according to the tenor of his acceptance, not the tenor of the bill he accepts. In this example A accepted to
pay P100,000 not P1 million as stated in the bill.
Can the acceptor vary the terms and conditions provided for in the instrument such that if the instrument is drawn by a particular person in the
amount of P100 million, the drawee may accept it and pay only P1?
Yes because the law allows an acceptor to accept the bill with qualification. In effect, the drawee’s liability is limited to tenor of his acceptance and
can never be compelled to pay the entire amount. The holder upon presentment for payment cannot demand from the acceptor the whole amount
as drawn by the drawer.
Suppose the bill is payable 30 days after sight. Then it was presented for acceptance to the drawee and the drawee indicated therein that it will
be payable one (1) year after sight. Is that allowed?
Yes because an acceptor engages to pay according to the tenor of his acceptance, not the tenor of the bill he accepts.
X drawer. Y drawee. Z payee. Z altered the amount from P1 million to P10 million which was accepted by Y. Z negotiated the bill to A, A to B, B
to C. C is a holder in due course. Up to what extent may C enforce the note?
C may enforce the note up to P10 million since Y, an acceptor, engages to pay according to the tenor of his acceptance, Y must pay to the
subsequent holder the amount called for by the time Y accepted even though larger than the original amount ordered by the drawer.
Do we have another view on this?
Yes, that the original tenor is the tenor of acceptance.
Which view should we apply?
The first view that the altered tenor is the tenor of acceptance since an acceptor engages to pay according to the tenor of his acceptance.
Therefore, he must pay to the subsequent holder the amount called for by the time he accepted even though larger than the original amount
ordered by the drawer.
What if he accepted it only for P10 million and it was negotiated by Z to A, A to B. B added an additional “0” to the amount changing the
amount to P100 million. B negotiated it to C, who is a holder in due course. Can C compel Y to whole amount of P100 million?
No because Y must only pay to the subsequent holder the amount called for by the time he accepted the note, which in this case is only P10
million.
SIR: You have to relate this with Section 124 which provides that where an instrument has been materially altered and is in the hands of a holder in
due course, not a party to the alteration, he may enforce payment thereof according to its original tenor.
Under the first view, what is the effect of Section 124 which provides that a holder in due course can recover only the original tenor of the
instrument?
This refers to the original tenor of the instrument taken from the standpoint of the person principally liable, Y, the acceptor. In our example the
original tenor of the instrument is P10 million, which the tenor of Y’s acceptance. If after his acceptance, a subsequent indorsee alters the bill to
read P100 million, then Y could be liable only for P10 million, the original tenor of his acceptance, even as to a holder in due course.
What is the effect if it’s the drawer’s signature which is forged and eventually payment was made on such forged signature?
The drawee bank is principally liable.
Can the drawee bank raise as a matter of defense that considering that the signature of the drawer was forged, all the subsequent
indorsements have no effect?
No because the drawee bank so impressed with public interests that it is bound to scrutinize the signatures of its clients to determine genuiness
and regularity. The drawee bank holds itself out to the public as the expert and the law holds it to a high standard of conduct. Thus, when drawee
bank is not able to detect forgery on their part, it is held primarily liable.
What are the effects of an acceptor’s admission?
The acceptor is consequently precluded from setting up the defense that:

1) the drawer is non-existent or fictitious because of his admissions of the drawer’s existence.
2) the drawer’s signature is a forgery, because he admits the genuineness of the drawer’s signature.
3) there is want of consideration between him and the drawer because by accepting the bill, he admits the capacity and authority of the drawer to
draw the bill.
WHEN PERSON DEEMED INDORSER — A person placing his signature upon an instrument otherwise than as maker, drawer, or acceptor is
deemed to be an indorser, unless he clearly indicates by appropriate words his intention to be bound in some other capacity. [63]
When is a person deemed an indorser?
In the absence of any indication in what capacity a person whose signature is written on the instrument intends to be bound, he shall be deemed
an indorser.
Is there an exception?
Yes when such person clearly indicates by appropriate words his intention to be bound in some other capacity.
LIABILITY OF IRREGULAR INDORSER — Where a person, not otherwise a party to an instrument, places thereon his signature in blank before
delivery, he is liable as indorser, in accordance with the following rules:
(a)If the instrument is payable to the order of a third person, he is liable to the payee and to all subsequent parties.
(b)If the instrument is payable to the order of the maker or drawer, or is payable to bearer, he is liable to all parties subsequent to the maker or
drawer.
(c)If he signs for the accommodation of the payee, he is liable to all parties subsequent to the payee. [64]
Who is an irregular indorser?
A person who is not a party to an instrument, places thereon his signature in blank before delivery.
What are the requisites in order that a person may be considered as an irregular indorser?
1) he must not otherwise be a party to the instrument, i.e., he must not be a maker, drawer, acceptor or regular indorser.
2) he must sign the instrument in blank.
3) he must sign before delivery.
Why is such person considered irregular or anomalous indorser?
He indorses in an unsual, singular or peculiar manner.
Given an example of an irregular indorser?
An instrument is payable to B or order. B’s name should appear on the back of the instrument as the first indorser, but instead, we find the name of
say, Y as the first indorser. In such as case, Y is an irregular indorser.
What is the meaning of “before delivery”?
Delivery here includes not only the original delivery to the payee but also every delivery from the party accommodated to a subsequent party.
What are the rules on irregular indorsement?
1) If the instrument is payable to the order of a third person, the irregular indorser is liable to the payee and to all subsequent parties.
2) If the instrument is payable to the order of the maker or drawer, or is payable to bearer, the irregular indorser is liable to all parties subsequent
to the maker or drawer.
3) If the irregular indorser signs for the accommodation of the payee, he is liable to all parties subsequent to the payee.
Give an example of an instrument payable to the order of a third person:
A makes a note payable to B or order. B is not willing to rely on the financial liability of A and is not willing to take the instrument unless Y’s credit
was on the back of it. A secures the signature of Y in blank. A delivered it to B who now takes it because of Y’s signature. B negotiates the not to C,
and C to D. Y here is an irregular indorser. Y is liable to B, the payee, who is a third person, and to C and D, subsequent parties.
Give an example of an instrument payable to the order of maker or drawer or payable to bearer:
A draws a bill payable to his own order but he cannot circulate the bill without name of Y being indorsed thereon. Y then signs at the back of the bill
in blank. A, drawer and payee, negotiates to it to B, B to C, C to D. Y here is an irregular indorser. Y is not liable to A, the drawer, but is liable to B, C,
and D, subsequent parties to the drawer.
Give an illustration of an irregular for accommodation of payee:
A makes a note payable to B or order. B wants to discount it with a bank but the bank is not willing to rely on the financial liability of A and B alone.
B obtains the signature of Y in blank, only for the purpose of lending his name or credit to B. Y is an irregular indorser. Y is not liable to B, the payee,
but to the bank and all subsequent parties to B.
WARRANTY WHERE NEGOTIATION BY DELIVERY AND SO FORTH — Every person negotiating an instrument by delivery or by a qualified
indorsement warrants —
(a)That the instrument is genuine and in all respects what it purports to be;
(b)That he has a good title to it;
(c)That all prior parties had capacity to contract;
(d)That he has no knowledge of any fact which would impair the validity of the instrument or render it valueless.
But when the negotiation is by delivery only, the warranty extends in favor of no holder other than the immediate transferee.
The provisions of subdivision (c) of this section do not apply to persons negotiating public or corporation securities, other than bills and notes.
[65]
What are the warranties made by a person negotiating an instrument by delivery or by qualified indorsement?
1) that the instrument is genuine and in all respects what it purports to be;
2) that he has a good title to it;
3) that all prior parties had capacity to contract;
4) that he has no knowledge of any fact which would impair the validity of the instrument or render it valueless.
If the negotiation is by mere delivery, to whom does the warranty extend?
The warranty extends only to the immediate transferee.
What if the person negotiates public or corporation securities other than bills and notes?
Such person makes the same warranties as those negotiating an instrument by delivery or by qualified indorser except he does not warrant that all
prior parties had capacity to contract.
A makes a note payable to B or bearer and delivers the same to B. B delivers the note to C. C delivers the note to D. What are the warranties
made by C?
C warrants all the matters and things mentioned in paragraphs (a), (b), (c) and (d) of Section 65.
When D, holder, enforce the said note against A, maker, A raise as a matter of defense the forgery of his own signature. May D insist to collect
the said amount from A?
No because A’s has a real defense, i.e., forgery of his signature. Thus, A’s signature is inoperative and therefore, it did not operate to make A a
party to the instrument nor bind him therein. As against A, D acquired no right to retain, discharge, or enforce payment of the note.
May D enforce the said instrument against C?
Yes, because C, who negotiated by mere delivery is liable to the D, holder, because C warrants that the instrument is genuine and in all respects
what it purports to be.
May D collect the said amount from B?
No, because B’s (who negotiated by mere delivery) warranty extends only to his immediate transferee, C. In effect, all the warranties mentioned in
Section 65 is not true with respect to D. Thus, D cannot insist on collecting the said amount from B.
A made a note and delivered the same to B. B delivered it to C, C delivered it to D. It turned out that A is insolvent and C knew that A is insolvent
at the time C delivered the note to D. When D tries to collect the said amount from C, may C raise the defense of insolvency?
No because C knew of A’s insolvency at the time C delivered the note to D and a party negotiating by delivery warrants that he is ignorant of any
fact that would render the instrument valueless. Therefore, C is liable on his warranty and cannot raise the defense of insolvency.
Who is a qualified indorser?
An indorser who merely transfers or assigns title to the instrument by adding the words “without recourse”, “san recours”, etc.
What is the nature of the liability of a qualified indorser or one who negotiates an instrument by mere delivery?
They are secondarily liable.
LIABILITY OF GENERAL INDORSER. — Every indorser who indorses without qualification, warrants, to all subsequent holders in due course —
(a)The matters and things mentioned in subdivisions (a), (b), and (c) of the next preceding section; and
(b)That the instrument is at the time of his indorsement valid and subsisting.
And, in addition, he engages that on due presentment, it shall be accepted or paid, or both, as the case may be, according to its tenor, and that
if it be dishonored, and the necessary proceedings on dishonor be duly taken, he will pay the amount thereof to the holder, or to any
subsequent indorser who may be compelled to pay it. [66]
What are the warranties made by a general indorser?
1) that the instrument is genuine and in all respects what it purports to be;
2) that he has a good title to it;
3) that all prior parties had capacity to contract;
4) that the instrument is at the time of his indorsement valid and subsisting.
What is the engagement of a general indorser?
He engages that on due presentment, it shall be accepted or paid, or both, as the case may be, according to its tenor, and that if it be dishonored,
and the necessary proceedings on dishonor be duly taken, he will pay the amount thereof to the holder, or to any subsequent indorser who may be
compelled to pay it.
METROPOL vs. SAMBOK MOTORS CO.
FACTS: Dr. Villareal issued a promissory note in favor of Sambok, which waspayable in monthly installments. The promissory note was then
indorsedto Metropol. Villareal defaulted payment and this prompted Metropol torun after Sampol. Sampol alleged that it is not liable since it was a
qualified indorser through the wordings it inserted in its indorsement—with recourse.
ISSUE: Whether Sampol is a qualfified indorser
HELD: A qualified indorsement constitutes the indorser a mere assignor of the titleto the instrument. It may be made by adding to the indorser's
signature the words "without recourse" or any words of similar import. Such an indorsement relieves the indorser of the general obligation to pay
if the instrument is dishonored but not of the liability arising from warranties on the instrument as provided in Section 65 of the Negotiable
Instruments Law already mentioned herein. However, appellant Sambok indorsed the note "with recourse" and even waived the notice of demand,
dishonor, protest and presentment.
"Recourse" means resort to a person who is secondarily liable after the default of the person who is primarily liable. Appellant, by indorsing the
note "with recourse" does not make itself a qualified indorser but a general indorser who is secondarily liable, because by such indorsement, it
agreed that if Dr. Villaruel fails to pay the note, plaintiff-appellee can go after said appellant. The effect of such indorsement is that the note was
indorsed without qualification. A person who indorses without qualification engages that on due presentment, the note shall be accepted or paid,
or both as the case may be, and that if it be dishonored, he will pay the amount thereof to the holder. Appellant Sambok's intention of indorsing
the note without qualification is made even more apparent by the fact that the notice of demand, dishonor, protest and presentment were an
waived. The words added by said appellant do not limit his liability, but rather confirm his obligation as a general indorser.
MARALIT vs. IMPERIAL
FACTS: Maralit filed three complaints for estafa through falsification of commercial documents through reckless imprudence against respondent
Imperial. Maralit alleged that she was assistant manager of the Naga City branch of the Philippine National Bank (PNB); that on May 20, 1992, June
1, 1992, and July 1, 1992 respondent Imperial separately deposited in her savings account at the PNB three United States treasury warrants and on
the same days withdrew their peso equivalent of P59,216.86, P130,743.60, and P130,326.00, respectively; and that the treasury warrants were
subsequently returned one after the other by the United States Treasury, on the ground that the amounts thereof had been altered. Maralit
claimed that, as a consequence, she was held personally liable by the PNB for the total amount of P320,287.30.
Judgment of the MTC was rendered as follows: WHEREFORE, in view of the foregoing considerations, the Court finds no ground to hold the accused
criminally liable for which she is charged, hence Corazon Jesusa L. Imperial is ACQUITTED of all the charges against her. The accused however is
civilly liable as indorser of the checks which is (sic) the subject matter of the criminal action.
The decision having become final and executory, the MTC ordered the enforcement of the civil liability against the accused arising from the
criminal action. Imperial moved to quash the writ of execution on the that the judgment did not order the accused to pay a specific amount of
money to a particular person as it merely adjudicated the criminal aspect but not the civil aspect hence there was no judgment rendered which can
be the subject of execution.
ISSUE: Whether Imperial liable to pay the amount in the treasury warrant.
HELD: Yes. The loss is chargeable to the accused who upon her indorsements warrant that the instrument is genuine in all respect what it purports
to be and that she will pay the amount thereof in case of dishonor. (Sec. 66 Negotiable Instrument Law)
It is argued that the decision of the MTC did not order respondent, as accused in the case, to pay a specific amount of money to any particular
person such that it could not be an adjudication of respondent’s civil liability. However, the ambiguity can easily be clarified by a resort to the text
of the decision or, what is properly called, the opinion part. Doing so, it is clear that it can only be to petitioner that respondent was made liable as
the former was the offended party in the case. As for what amount respondent is liable, it can only be for the total amount of the treasury
warrants subject of the case, determined according to their peso equivalent, in the decision of the MTC.
What made the supreme court conclude that Imperial was a general indorser?
What is the defense raised by Imperial?
SAPIERA vs. CA
FACTS: Remedios Nota Sapiera, a sari-sari store owner, on several occasions, purchased from Monrico Mart grocery items, mostly cigarettes and
paid for them with checks issued by one Arturo de Guzman. These checks were signed by Sapiera on the back. When they were presented for
payment, the checks were dishonoured because the drawer’s account was already closed. Respondent Ramon Samua informed Arturo de Guzman
and petitioner but both failed to pay. Hence, four charges of Estafa were filed against Sapiera while two counts of BP 22 was filed against Arturo de
Guzman. These cases were consolidated. On December 27 1999, the RTC Dagupan city acquitted Sapiera of all charges of Estafa but did not rule on
the civil aspect of the case. Arturo de Guzman was held liable for the 2 BP 22 cases and was ordered to pay Sua 167,150 Php as civil indemnity and
was sentenced for imprisonment of 6 months and 1 day. Respondent Sua appealed regarding the civil aspect of Sapiera’s case but the court denied
it saying that the acquittal of petitioner was absolute. Respondent filed a petition for mandamus with the Court of Appeals praying that the appeal
be given due course, this was granted. On January 1996, CA rendered a decision ordering Sapiera to pay 335000 php to Sua. Sapiera filed a motion
for reconsideration. The CA the issued a resolution noting that the admission of both parties that Sua already collected 125000 for the 2 check paid
by De Guzman on the BP 22 cases. It appears that the payment should be deducted on her liability as they involved the same two checks which
Sapiera was involved in. the CA deducted the liability to 210,000 Php. Hence this petition by Sapiera claiming that the CA erred in rendering such
decision because she was acquitted and the fact from which the civil liability exists did not exist.
ISSUE: Whether Sapiera could be held civilly liable when she was acquitted in the criminal charges against her.
HELD: Yes. Sec. 2 of rule 111 of the rules of court provides that extinction of the penal action does not carry with it the extinction of the civil, unless
this shows that the fact from which the civil liability is based is proven to not have existed because of such acquittal. Civil liability is not
extinguished where: (a) the acquittal is not based on reasonable doubt. (b) Where the court expressly declares that the liability is not criminal but
only civil, (c) where the civil liability is not derived from or based on the criminal act. The decision of the case would show that the acquittal was
based on failure of the prosecution to present sufficient evidence showing conspiracy between her and De Guzman. Since all checks were signed by
Sapiera on the back, sec 17 of Negotiable instruments law says that she would be considered an indorser of the bill of exchange and under section
66 thereof would be held liable for breach of warranty and is held liable to pay the holder who may be compelled to pay the instrument.
Why was Sapiera held liable by the Supreme Court?
Was Sapiera considered a general indorser?
BPI vs. CA and NAPIZA
FACTS: Benjamin Napiza maintains an account with the Bank of the Philippine Islands (BPI). In 1987, Napiza was approached by Henry Chan and the
latter gave him a $2,500 Continental Bank Manager’s check. Chan asked if Napiza can deposit the check to his (Napiza’s BPI account) by way of
accommodation and for the purpose of clearing the said check. Napiza agreed and so he deposited the check on September 3, 1987. Napiza then
delivered a signed blank withdrawal slip to Chan with the condition that the $2,500.00 may only be withdrawn if the check cleared. For some
reason, the withdrawal slip ended up in the hands of one Ruben Gayon who went to BPI and successfully withdrew the $2,500.00. At the time of
the withdrawal, the check was not yet cleared. Then days later, BPI was notified by the drawee bank named in the check that the check is actually a
counterfeit.
ISSUE: Whether Napiza may be held liable to refund the amount of the check.
HELD: No. The Supreme Court ruled that ordinarily, Napiza would have been liable because he is an accommodation indorser. But due to the
attendant circumstances, Napiza is discharged from liability. The withdrawal slip indicates as well as the rules promulgated by BPI that withdrawal
from the bank should be accompanied by the presentment of the account holder’s (Napiza’s) savings bankbook. This was not done so in the case at
bar because Gayon was able to withdraw without it. Further, BPI allowed the withdrawal even before the check cleared. BPI already credited the
$2,500.00 to Napiza’s account even without the drawee bank clearing the check. This is contrary to common banking practices and because of such
negligence and lack of diligence, BPI, as the collecting bank, shall suffer the loss.
Again what is the negligence on the part of the bank in this case?
Was Napiza considered a general indorser in this case?
What is the proximate cause of the loss?
What is the distinction between the fourth warranty provided for in Section 65 and Section 66?
The qualified indorser or person negotiating by delivery warrants that he is ignorant of any fact that will impair the validity of the instrument or
render it valueless while a general indorser warrants that the instrument he is indorsing is valid and subsisting regardless whether he is ignorant of
that fact or not. But the fourth warranty of a general indorser does not run in favor of holders who are parties to illegal consideration.
A made a note payable to B. However, the consideration made by B on the note is illegal. B negotiated the note to C. C negotiated the note to D.
C in this case did not know of the illegality of the consideration. May D hold C liable?
Yes because C, as a general indorser, warrants that the instrument is valid and subsisting, even if he did not know of the illegality of the
consideration.
What if in that example C is a qualified indorser?
C would not be liable because he does not warrant that the instrument is valid and subsisting but merely that he does not know of any fact which
impairs the validity of the instrument or render it valueless, and C, did not know of the illegality of consideration.
Suppose C is a general indorser, may D make him liable at all times?
No not at all times. D may make C liable only when D is a/an:

1) subsequent holder in due course
2) person who derive his title from a holder in due course
3) immediate transferee, even when he is not a holder in due course.
What is your basis for the 2nd instance?
Section 58 of the NIL.
SIR: Despite the fact that the law provides that the warranties are extended only to a holder in due course, still we make some exceptions because
the law does not provide that the general indorser warrants to a holder in due course only.
Are the warranties provided under Section 66 extend to the genuineness of the drawer’s signature to the drawee who pays it?
No because a drawee is not a holder in due course under Section 52 nor a holder under Section 191.
What is the type of liability of a general indorser?
Secondary liability.
Should the reason for dishonor be established before a general indorser can be made liable?
No because the law does not require that the reason for the dishonor be established. It is sufficient that there was dishonor.
What is the liability of a general indorser if the person primarily liable is insolvent?
He is liable even though he neither knew nor concealed that fact because he engages to pay if the person primarily liable cannot pay.
Make a summary of distinctions between liabilities of (1) persons negotiating by mere delivery, (2) qualified indorsers, and (3) general indorsers:
Party negotiating by delivery Qualified Indorser General Indorser

As to whom the warranty extend: Only to immediate transferee All subsequent parties who 1) subsequent holders in due
acquire title through his course
indorsement regardless of 2) persons who derive their title
whether they are holders in due from a holder in due course
course or not. 3) immediate transferees, even if
they are not holders in due
course.
As to the fourth warranty: That he has no knowledge of any fact which would impair the validity of That the instrument is at the time
the instrument or render it valueless. of his indorsement valid and
subsisting.
As to their engagement: Does not engage to pay the instrument if it is dishonored by non- Engages to pay the holder or any
acceptance or non-payment except when such dishonor arises from his intervening party who may be
four (4) warranties. [limited secondary liability] compelled by the holder to pay
the instrument whether such
dishonor arises from the
warranties or from other causes
such as insolvency.
If person primarily liable is insolvent, is a notice of dishonor a condition sine qua non in order to hold the general indorser liable?
Yes because that is one way you can establish that such person primarily liable is insolvent unless his insolvency is a public knowledge.
What are the liabilities of an assignor?
(1) He is responsible for the existence and legality of the credit at the time of the sale unless it should have been sold as doubtful but not for the
solvency of the debtor unless it has been expressly stipulated or unless the insolvency was prior to the sale and of common knowledge.
(2) In case the assignor in good faith should have made himself responsible for the solvency of the debtor and the contracting parties should not
have agreed upon the duration of the liability, it shall last for one year only from the time of the assignment if the period already expired.
(3) If the credit should be payable within a term or period which has not yet expired, the liability shall cease one year after maturity.
(4) He is liable for the price received and for the expenses of the contract, and any other legitimate payments made by reason of the sale.
(5) An assignor in bad faith shall always be answerable for the payment of all expenses, and damages.
A made a note to B or bearer. B negotiated it by mere delivery. What section governs his liability under the NIL?
Section 65.
What if he indorses it plus delivery?
He is governed by Section 65 if he is a qualified indorser, and Section 66 if he is a general indorser.
LIABILITY OF INDORSER WHERE PAPER NEGOTIABLE BY DELIVERY — Where a person places his indorsement on an instrument negotiable by
delivery he incurs all the liabilities of an indorser. [67]
ORDER IN WHICH INDORSERS ARE LIABLE — As respects one another, indorsers are liable prima facie in the order in which they indorse; but
evidence is admissible to show that as between or among themselves they have agreed otherwise. Joint payees or joint indorsees who indorse
are deemed to indorse jointly and severally. [68]
With respect to one another, what, if any, is the liability of the indorsers?
They are prima facie liable in the order in which they indorse.
A made a note making B as the payee. The note was negotiated to C. C to D. D to E. E to F. F to G. G wants to enforce the note against A.
However, A is unable to pay. G now wants to enforce the note against D. May D raise it as a matter of defense that before G can go after him,
the latter has to make E and F liable first?
No because the rules that indorsers are liable in the order they indorse is only as between or among the indorsers themselves but not against a
holder. As to the holder, they are liable in any order.
What is the presumption if a joint indorsees indorse an instrument?
Joint payees or indorsees are deemed to indorse jointly and severally, i.e., their obligation is solidary in nature. Thus, if one of the indorsees is
made liable by the holder, he has the right to seek reimbursement from the other indorsees.
Is it not contrary to the provisions of the Civil Code?
No because Section 68 of the NIL provides for such presumption.
Is there an exception to the right to seek reimbusement?
Yes when payment was made voluntarily and without any judicial demand and that there is an absolute absence of evidence that the principal
debtor is insolvent. (Sadaya vs Sevilla)
LIABILITY OF AN AGENT OR BROKER — Where a broker or other agent negotiates an instrument without indorsement, he incurs all the liabilities
prescribed by section sixty-five of this Act, unless he discloses the name of his principal and the fact that he is acting only as agent. [69]
What if the agent or broker negotiates an instrument without an indorsement?
He incurs all the liabilities prescribed by section sixty-five of this Act, unless he discloses the name of his principal and the fact that he is acting only
as agent.
EFFECT OF WANT OF DEMAND ON PRINCIPAL DEBTOR — Presentment for payment is not necessary in order to charge the person primarily
liable on the instrument; but if the instrument is, by its terms, payable at a special place, and he is able and willing to pay it there at maturity,
such ability and willingness are equivalent to a tender of payment upon his part. But, except as herein otherwise provided, presentment for
payment is necessary in order to charge the drawer and indorsers. [70]
What is presentment for payment?
Presentment for payment is the production of a bill of exchange to the drawee or acceptor for payment, or the production of a promissory note to
the party liable for payment.
Is presentment for payment necessary in order to charge the person primarily liable?
No.
A is the maker, B is the payee, C is the indorser. The note provides that it is payable at Shangri-la Mactan. Is it necessary for C to present the
note for payment in order to charge A liable?
No the rule is still the same.
Supposing A is able and willing to pay the note at Shangri-la Mactan. What is the effect of lack of presentment for payment?
The only effect is that it is equivalent to a tender of payment on the part of A, and C, the holder, loses his right to recover interest due subsequent
to maturity and costs of collection but he cant still hold A liable.
What is tender of payment?
Tender of payment is the manifestation by the debtor of a desire to comply with or pay an obligation.
SIR: Tender of payment is particularly used in the litigation process. When you pay an obligation and the creditor refuses to accept such payment
without just cause, the tender of payment will discharge the debtor of the obligation to pay but only after a valid consignation of the sum due shall
have been made with the proper court.
Is presentment for payment necessary in order to charge persons secondarily liable?
Yes because it is provided for under Section 68 of the NIL.
A is the drawer, B is the acceptor, C is the payee. D and E are the indorsers. F is the holder. F failed to make presentment for payment to B,
acceptor. Who among the can F hold liable?
Only B, the acceptor, would be left against whom F can enforce the bill because presentment for payment is not necessary in order to charge the
person primarily liable. (A, B, C, D are discharged)
What are the necessary steps to charge the person secondarily liable in a bill of exchange?
(1) In the three cases required by law presentment for acceptance to the drawee or negotiation within a reasonable time after acquisition:
(a)Where the bill is payable after sight, or in any other case, where presentment for acceptance is necessary in order to fix the maturity of the
instrument; or
(b)Where the bill expressly stipulates that it shall be presented for acceptance; or
(c)Where the bill is drawn payable elsewhere than at the residence or place of business of the drawee. [143]
Except as herein otherwise provided, the holder of a bill which is required by the next preceding section to be presented for acceptance must
either present it for acceptance or negotiate it within a reasonable time. If he fail to do so, the drawer and all indorsers are discharged. [144]
unless excused:
(a)Where the drawee is dead, or has absconded, or is a fictitious person or a person not having capacity to contract by bill.
(b)Where, after the exercise of reasonable diligence, presentment cannot be made.
(c)Where, although presentment has been irregular, acceptance has been refused on some other ground. [148]
In other cased aside from the three [143], there is no need for presentment for acceptance.
(2) If the bill is dishonored by non-acceptance,
(a) notice of dishonor by non-acceptance must be given to persons secondarily liable unless excused and, in case of foreign bills,
(b) protest for dishonor by non-acceptance must be made unless excused.
(3) But if the bill is accepted or if the bill is not required to be presented for acceptance, it must be presented for payment to the persons
primarily liable, unless excused.
(4) If the bill is dishonored by non-payment,
(a) a notice of dishonor by non-payment must also be given to person secondarily liable unless excused, and in case of foreign bills,
(b) a protest for dishonor by non-acceptance must be made unless excused.
What are the necessary steps to charge the person secondarily liable in a promissory note?
(1) Presentment for payment must be made within the period required to the person primarily liable unless excused; and
(2) if the note is dishonored by non-payment, notice of dishonor by non-payment must be given to the persons secondarily liable unless excused.
PRESENTMENT WHERE INSTRUMENT IS NOT PAYABLE ON DEMAND AND WHERE PAYABLE ON DEMAND. — Where the instrument is not payable
on demand, presentment must be made on the day it falls due. Where it is payable on demand, presentment must be made within a reasonable
time after its issue, except that in the case of a bill of exchange, presentment for payment will be sufficient if made within a reasonable time
after the last negotiation thereof. [71]
When should presentment be made when the instrument is not payable on demand?
Presentment must be made on the day it falls due.
When should presentment be made when the instrument is payable on demand?
Presentment must be made within a reasonable time after its issue, except that in the case of a bill of exchange, presentment for payment will be
sufficient if made within a reasonable time after the last negotiation thereof.
Under Section 71, is this presentment for acceptance or presentment for payment?
Presentment for payment.
A drew a bill of exchange on Dec 31, 2010. B is the acceptor. C is the payee. C negotiated it to D. D to E. E negotiated it to F on February 5, 2014.
F is the present holder. On February 8, 2014, F wants to claim the amount stated in the bill from the acceptor. May the acceptor deny payment?
No because in the case of a bill of exchange, presentment for payment will be sufficient if made within a reasonable time after the last negotiation
thereof.
Supposing E did not negotiate it to F but after finding that the bill is just inside his locker, E immediately went to the acceptor. May the acceptor
deny payment?
Yes because the bill was not presented for payment within a reasonable time after the last negotiation.
SIR: The holder may circumvent the provisions of the NIL by simply negotiating the instrument to some other person. If you have a bill of exchange
which is more than a year old already, what you do is look for a person who takes it for value and negotiate such instrument to said person. Such
person can go back to the acceptor to claim payment because the law provides that presentment for payment will be sufficient if made within a
reasonable time after the last negotiation. But if you are the person whom the instrument is negotiated, there must be a caveat. You should inquire
or raise questions to the person who is negotiating the instrument to you regarding the nature and circumstance on why the bill is not yet paid, etc.
What is meant by last negotiation?
Last transfer for value.
Supposing that E colluded with F. F did not give any valuable consideration to E. Can the acceptor raise it as a matter of defense?
No because an acceptor is required by the law to pay it according to the tenor of his acceptance. Unlike a maker or an indorser who may raise the
absence or failure of consideration as a matter of defense as against any person not a holder in due course.
Why is it necessary that the last negotiation is the last transfer for value?
Because negotiation is a contract. In order to validly constitute a contract, there must be a value consideration. Upon perfection, parties can
compel other parties of the contract to perform their obligations.
PRUDENTIAL BANK vs. CA
FACTS:
ISSUE: Whether it is necessary for Philippine Rayon Mills to accept the drafts forwarded by the bank.
HELD: No need to accept
What is a letter of credit?
It is an engagement by a bank or other person made at the request of a customer that the issuer will honor drafts or other demands for payment
upon compliance with the conditions specified in the credit. Through a letter of credit, the bank merely substitutes its own promise to pay for the
promise to pay of one of its customers who in return promises to pay the bank the amount of funds mentioned in the letter of credit plus credit or
commitment fees mutually agreed upon.
Is there a finding from the Supreme Court that the drafts here are not required to be presented for acceptance?
Yes because they are sight drafts.
What are instruments that require presentment for acceptance?/What are the instances wherein there is a need for an instrument to be
presented for acceptance?
Presentment for acceptance must be made:

1) where the bill is payable after sight, or in any other case, where presentment for acceptance is necessary in order to fix the maturity of the
instrument; or
2) where the bill expressly stipulates that it shall be presented for acceptance; or
3) where the bill is drawn payable elsewhere than at the residence or place of business of the drawee.
WONG vs CA
FACTS: Wong is a collector of Limtong Press, Inc., a company which prints calendars. Wong was assigned to collect check payments from LPI’
clients. One time, 6 of LPI’s clients were not able to give the check payments to Wong. Wong then made arrangement with LPI so that for the
meantime, Wong can use his personal checks to guarantee the calendar orders of the LPI’s clients. LPI however has a policy of not accepting
personal checks of its agents. LPI instead proposed that the personal checks should be used to cover Wong’s debt with LPI which arose from
unremitted checks by Wong in the past. Wong agreed. So he issued 6 checks dated December 30, 1985. Before the maturity of the checks, Wong
persuaded LPI not to deposit the checks because he said he’ll be replacing them within 30 days. LPI complied however Wong reneged on the
payment. On June 5, 1986 or 157 days from date of issue, LPI presented the check to RCBC but the checks were dishonored (account closed). On
June 20, 1986, LPI sent Wong a notice of dishonor. Wong failed to make good the amount of the checks within 5 banking days from his receipt of
the notice. LPI then sued Wong for violations of Batas Pambansa Blg. 22. Among others, Wong argued that he’s not guilty of the crime of charged
because one of the elements of the crime is missing, that is, prima facie presumption of “knowledge of lack of funds” against the drawer. According
to Wong, this element is lost by reason of the belated deposit of the checks by LPI which was 157 days after the checks were issued; that he is not
expected to keep his bank account active beyond the 90-day period – 90 days being the period required for the prima facie presumption of
knowledge of lack of fund to arise.
ISSUE: Whether or not Wong is guilty of the crime charged.
HELD: Yes. Wong is guilty of violating BP 22. The second element of violation of BP 22 pertinent is:
2) The knowledge of the maker, drawer, or issuer that at the time of issue he does not have sufficient funds in or credit with the drawee bank for
the payment of such check in full upon its presentment; and
Under the second element, the presumption of knowledge of the insufficiency arises if the check is presented within 90 days from the date of issue
of the check. This presumption is lost, as in the case at bar, by failure of LPI to present it within 90 days. But this does not mean that the second
element was not attendant with respect to Wong. The presumption is lost but lack of knowledge can still be proven, LPI did not deposit the checks
because of the reassurance of Wong that he would issue new checks. Upon his failure to do so, LPI was constrained to deposit the said checks.
After the checks were dishonored, Wong was duly notified of such fact but failed to make arrangements for full payment within five (5) banking
days thereof. There is, on record, sufficient evidence that Wong had knowledge of the insufficiency of his funds in or credit with the drawee bank at
the time of issuance of the checks.
The Supreme Court also noted that under Section 186 of the Negotiable Instruments Law, “a check must be presented for payment within a
reasonable time after its issue or the drawer will be discharged from liability thereon to the extent of the loss caused by the delay.” By current
banking practice, a check becomes stale after more than six (6) months, or 180 days. LPI deposited the checks 157 days after the date of the
check. Hence said checks cannot be considered stale.
SIR: Under Section 71, a bill of exchange must be presented for payment within a reasonable time after the last negotiation. With respect to notes,
it should be presented for payment within a reasonable time after its issue. A check is a bill of exchange drawn against a bank payable on demand.
However, there is a separate rule on when should a check be presented for payment. Under Section 186, a check must be presented for payment
within a reasonable time after its issue. Not after its last negotiation, despite the fact that a check is a bill of exchange.
What is a stale check?
A stale check is one which has not been presented for payment within a reasonable time after its issue.
What if the check is not presented after seven (7) months?
Then the check is already stale.
What if there is a nuclear war and banks are closed?
Banking practices may be relaxed when the delay of presentment is caused by circumstances beyond the control of the holder, and not imputable
to his default, misconduct, or negligence. When the cause of delay ceases to operate, presentment must be made with reasonable diligence. [Sec.
81]
What is reasonable time?
In order to determine what is a “reasonable time”, regard is had:

(1) to the nature of the instrument;
(2) usage of trade or business with respect to such instrument and
(3) the facts of the particular case.
What is the test of reasonableness with respect to time?
The test is whether the payee employed such diligence as a prudent man exercises in his own affair. That span of time by which a diligent and
prudent person may present said check for payment. If it is within that period of time, then you are presenting the check within a reasonable time.
ICB vs Sps GUECO
FACTS: Respondent spouses, obtained a loan from petitioner bank for the purchase of a car secured by chattel mortgage. Unable to pay the
monthly amortizations, the bank sued for collection. Thru negotiations, the amount was reduced and payment would release the car. Respondent
spouses delivered a manager’s check in the said amount but petitioner bank refused to release the car for respondents’ refusal to sign the joint
motion to dismiss. Unable to recover possession of the car, respondent filed an action for damages against petitioner based on fraud. Respondents
alleged that delivery of the check produced the effect of payment. They also contend that since the check was not presented within a reasonable
time, the same became stale. Petitioner, however, did not encash the check because of the present case.
ISSUE: Whether the bank was negligent in opting not to deposit or use the manager’s check.
HELD: A check must be presented for payment within a reasonable time after its issue. In the case at bar, the check involved is a manager's check
and is accepted in advance by the act of issuance. It is really the bank’s own check and may be treated as a promissory note with the bank as a
maker. Assuming that presentment is needed, failure to present on time will result to the discharge of the drawer only to the extent of the loss
caused by the delay. In the case at bar, respondents have not alleged damage or loss caused by the delay or non-presentment.
Even assuming that presentment is needed, failure to present for payment within a reasonable time will result to the discharge of the drawer only
to the extent of the loss caused by the delay. Failure to present on time, thus, does not totally wipe out all liability. In fact, the legal situation
amounts to an acknowledgment of liability in the sum stated in the check. In this case, the Gueco spouses have not alleged, much less shown that
they or the bank which issued the manager's check has suffered damage or loss caused by the delay or non-presentment. Definitely, the original
obligation to pay certainly has not been erased.
It has been held that, if the check had become stale, it becomes imperative that the circumstances that caused its non-presentment be
determined. In the case at bar, there is no doubt that the petitioner bank held on the check and refused to encash the same because of the
controversy surrounding the signing of the joint motion to dismiss. We see no bad faith or negligence in this position taken by the Bank.
What is a manager’s check?
It is a check drawn by the manager of a bank in the name of the bank against the bank itself. It is similar to the cashier’s check as to effect and use.
There is an assurance that the check is funded. It is negotiable because it complies with the requisites on forms under the Negotiable Instruments
Law.
Is there a need for a manager’s check to be presented for acceptance?
No because it is not one of the instances mentioned under Sec. 143 and it is accepted in advance by the act of its issuance.
What made the Supreme Court rule that the check did not become stale?
The check involved is a manager’s check which means it is already funded and it is accepted in advance by the act of its issuance. Considering that
there is already an acceptance made by the bank, it may be likened to a promissory note with the bank as a maker. At the time of acceptance (upon
issuance), the drawer becomes primarily liable such that there is no more need to present the check for payment in order to charge the bank liable.
SIR: Just because you are an acceptor it does not follow that you cannot raise any defense at all. If you want to escape liability, it is up to you to
show that you are a mere agent of the drawer or you have to allege and prove any other defense which you have to the liability. (PNB vs CA) In
effect, even if you are primarily liable as an acceptor, it does not follow that you cannot claim defenses at all. Take note that under Sec. 71 provides
that presentment MUST be made. You correlate that with Sec. 62 where the acceptor engages to pay according to the tenor of his acceptance and
the last sentence of Sec. 71 . xxx presentment for payment will be sufficient if made within a reasonable time after the last negotiation thereof. I
submit that this can be used by the acceptor to evade his liability such that if there is no presentment for payment within reasonable time after the
last negotiation, they acceptor may refuse payment on the ground that the law requires that it be presented for payment within reasonable time
after its last negotiation.
However, take note that Sec. 70 provides that presentment for payment is not necessary in order to charge the person primarily liable (acceptor)
on the instrument. You have to balance Secs. 70 & 71. Say for example, I have with me a bill of exchange, and I kept such bill in the cabinet for 10
years. When I discovered that I have this bill of exchange, I negotiate it to my friend to make it appear that the negotiation was for value. Even if
the bill was not negotiated within reasonable time after its issuance, for as long you present it for payment within a reasonable time after the last
negotiation, that person who took the instrument for value may go to the acceptor and present it for payment.
Now what if the who person discovered the said instrument immediately went to the acceptor because he wasn’t able to study NIL, and present it
for payment to the acceptor. Of course the acceptor may refuse payment on the ground mentioned in Sec 71. But such person may say that under
Sec. 70, presentment for payment is not necessary in order to charge the person primarily liable on the instrument. What will the acceptor say? If I
were the acceptor, I would say that the acceptor has all the rights to present his defenses and I submit that Sec. 71 is part of his defense.
In order for a check not to become stale:

GR: A check must be presented for payment within a reasonable time after its issue.
EXC: If it is a manager’s check or as cashier’s check, the bank already accepted it in advance.
A check becomes stale after more than six (6) months, or 180 days. It would seem that the SC will not buy if the acceptor later on say (for example,
the bill was drawn in 1980 and it was not negotiated to some other person and in 2014, the holder immediately presented it to the acceptor for
payment) that it was not negotiated within a reasonable time so I should be absolved from my liability. It would seem that will be the contention of
the acceptor, it might not be given credence by the SC because of the Gueco case. Although it is not entirely in four square w/ the Gueco case. But
the principle laid down in the Gueco case is that if there already an acceptance, even if the check became stale (not negotiated within reasonable
time after its issue), the SC said that considering that there was acceptance already, you cannot hide under the cloak that the check became stale.
That is why the SC said that this is already akin to a promissory note wherein you become a maker (a person who is primarily liable), so even if the
check already became stale, you cannot use it as a matter of defense. Hence, you are still primarily liable. In fact, presentment for payment is not
necessary in order to charge you.
WHAT CONSTITUTES A SUFFICIENT PRESENTMENT — Presentment for payment, to be sufficient, must be made —
(a)By the holder, or by some person authorized to receive payment on his behalf;
(b)At a reasonable hour on a business day;
(c)At a proper place as herein defined;
(d)To the person primarily liable on the instrument, or if he is absent or inaccessible, to any person found at the place where the presentment is
made. [72]
What are the elements in order for presentment for payment to be considered sufficient?
Presentment for payment must be made

1) by the holder, or by some person authorized to receive payment on his behalf;
2) at a reasonable hour on a business day;
3) at a proper place as herein defined;
4)To the person primarily liable on the instrument, or if he is absent or inaccessible, to any person found at the place where the presentment is
made.
Supposing the person primarily liable is absent or inaccessible and the only person found at the place where the presentment is to be made is
an insane person, will you present it to such person?
No because what is contemplated by the law are persons with sound mind and judgment. A diligent person can simply come back on the next
business day.
What is a reasonable hour on a business day?
It depends on the general custom at the place of the particular transaction.
*Is it necessary to present the instrument personally to the person primarily liable?
No because the law provides that if such person is absent or inaccessible, presentment for payment can be made to any person found at the place
where the presentment is made.
PLACE OF PRESENTMENT — Presentment for payment is made at the proper place —

(a)Where a place of payment is specified in the instrument and it is there presented;
(b)Where no place of payment is specified, but the address of the person to make payment is given in the instrument and it is there presented;
(c)Where no place of payment is specified and no address is given and the instrument is presented at the usual place of business or residence of
the person to make payment;
(d)In any other case if presented to the person to make payment wherever he can be found, or if presented at his last known place of business
or residence. [73]
What is meant by the words “proper place”?
1) where a place of payment is specified in the instrument and it is there presented;

2) where no place of payment is specified, but the address of the person to make payment is given in the instrument and it is there presented;
3) where no place of payment is specified and no address is given and the instrument is presented at the usual place of business or residence of the
person to make payment;
4) in any other case if presented to the person to make payment wherever he can be found, or if presented at his last known place of business or
residence.
If you see the maker in the spa having the time of his life, are you allowed to present it right there and then?
No you have to examine the instrument first in order to determine the proper place for payment. (You must follow the first 3 instances before you
may present the instrument for payment wherever he can be found.)
INSTRUMENT MUST BE EXHIBITED. — The instrument must be exhibited to the person from whom payment is demanded, and when it is paid
must be delivered up to the party paying it. [74]
To whom should the instrument be exhibited?
The instrument must be exhibited to the person from whom payment is demanded.
To whom should the instrument be delivered?
It must be delivered up to the party paying it.
Why is there a need to exhibit the instrument?
1) to determine the genuineness of the instrument and the right of the holder to receive payment
2) to enable him to reclaim possession upon payment.
X wanted to collect an amount in the promissory note from his friend Y. X scanned the note and sent it to Y through a private message on
Koobface. Is that sufficient exhibition of the instrument?
No because the law requires that there must be actual exhibition.
When is exhibition excused?
1) when the debtor does not demand to see the instrument but refuses payment on some other grounds.
2) when the instrument is lost or destroyed.
PRESENTMENT WHERE INSTRUMENT PAYABLE AT BANK — Where the instrument is payable at a bank, presentment for payment must be made
during banking hours, unless the person to make payment has no funds there to meet it at any time during the day, in which case presentment
at any hour before the bank is closed on that day is sufficient. [75]
When an instrument is payable at a bank, when should presentment for payment be made?
During banking hours.
Is there an exception?
Unless the person to make payment has no funds there to meet it at any time during the day, in which case presentment at any hour before the
bank is closed on that day is sufficient.
PRESENTMENT WHERE PRINCIPAL DEBTOR IS DEAD — Where the person primarily liable on the instrument is dead, and no place of payment is
specified, presentment for payment must be made to his personal representative, if such there be, and if, with the exercise of reasonable
diligence, he can be found. [76]
Where will you present the instrument when the person primarily liable decided to transfer his residency to Queens City Gardens?
Where no place of payment is specified, presentment for payment must be made to his personal representative, if such there be, and if, with the
exercise of reasonable diligence, he can be found.
PRESENTMENT TO PERSONS LIABLE AS PARTNERS — Where the persons primarily liable on the instrument are liable as partners, and no place of
payment is specified, presentment for payment may be made to any one of them, even though there has been a dissolution of the firm. [77]
What if the persons primarily liable are partners and no place of payment is specified?
Presentment for payment may be made to any one of them.
Can it be made after the dissolution of the partnership?
Yes presentment can be made even though there has been a dissolution of the firm.
PRESENTMENT TO JOINT DEBTORS — Where there are several persons, not partners, primarily liable on the instrument, and no place of
payment is specified, presentment must be made to them all. [78]
What if several persons, not partners, who are primarily liable on the instrument, and no place of payment is specified?
Presentment must be made to them all.
WHEN PRESENTMENT NOT REQUIRED TO CHARGE THE DRAWER — Presentment for payment is not required in order to charge the drawer
where he has no right to expect or require that the drawee or acceptor will pay the instrument. [79]
When is presentment for payment not required in order to charge the drawer?
Where the drawer has no right to expect or require that the drawee or acceptor will pay the instrument.
Give an example:
1) In a case of a check upon which payment has been stopped.

2) Where the drawer’s balance is less than the amount of the check.
3) where the drawer of a bill containing the words “Pay from balance” had no money on deposit with the drawee bank but expected to arrange
with the broker to cover drafts.
WHEN PRESENTMENT NOT REQUIRED TO CHARGE THE INDORSER — Presentment for payment is not required in order to charge an indorser
where the instrument was made or accepted for his accommodation and he has no reason to expect that the instrument will be paid if
presented. [80]
When presentment not required in order to charge the indorser?
Where the instrument was made or accepted for his accommodation and he has no reason to expect that the instrument will be paid if presented.
Give an example:
A makes a note for the accommodation of B, payee. B indorses to C, C to D, D to E, E to F. F need not make presentment for payment to A in order
to charge B, indorser. The reason is that as B did not give value to A, B has no reason to expect that the note will be paid upon presentment. But C,
D, and E are discharged as no presentment has been made. In effect, the accommodated payee-indorser(B), who is the person primarily liable, is
not discharged even if no presentment for payment is made.
WHEN DELAY IN MAKING PRESENTMENT IS EXCUSED — Delay in making presentment for payment is excused when the delay is caused by
circumstances beyond the control of the holder, and not imputable to his default, misconduct, or negligence. When the cause of delay ceases to
operate, presentment must be made with reasonable diligence. [81]
When is delay in making presentment excused?
When the delay is caused by circumstances beyond the control of the holder, and not imputable to his default, misconduct, or negligence.
Give examples of circumstances beyond the control of the holder:
1) overwhelming calamity
2) malignant diseases
3) interruption of trade negotiations by political circumstances
4) war between maker’s and holder’s countries
5) suspension of commercial INTERCOURSE by public enemy
6) occupation of country where parties reside or where the instrument is payable
7) by public and positive interdictions and prohibitions of state
8) impracticability of finding maker or his place of residence.
WHEN PRESENTMENT MAY BE DISPENSED WITH — Presentment for payment is dispensed with —
(a)Where after the exercise of reasonable diligence presentment as required by this Act can not be made;
(b)Where the drawee is a fictitious person;
(c)By waiver of presentment, express or implied. [82]
Under what circumstances may presentment for payment may be excused?
1) where after the exercise of reasonable diligence presentment as required by this Act cannot be made;
2) where the drawee is a fictitious person;
3) by waiver of presentment, express or implied.
Give an example of the first circumstance:
Where the bill is payable in the United States, after the occupation of the Philippines by Japan, presentment for payment is dispensed with.
Give an example of the second circumstance:
Pay to the order of X.

To: Carmen Sandiego (Sgd.) Y
Give an example of the third circumstance:
Express:
Pay to B or order P1000.
Presentment waived.
To X (Sgd.) Y
Implied:
May be manifested by any language, conduct or agreement between the parties reasonably calculated to lead the holder to believe presentment is
waived or to mislead or prevent him from treating the bill as he otherwise would.
WHEN INSTRUMENT DISHONORED BY NON-PAYMENT — The instrument is dishonored by non-payment when —

(a)It is duly presented for payment and payment is refused or can not be obtained; or
(b)Presentment is excused and the instrument is overdue and unpaid. [83]
As a rule, is it required that presentment for payment be made in order to charge the person secondarily liable?
Yes.
What are the exceptions?
1) where the drawer has no right to expect or require that the drawee or acceptor will pay the instrument. (Sec. 79)
2) where the instrument was made or accepted for the indorser's accommodation and he has no reason to expect that the instrument will be paid
if presented. (Sec. 80)
3) where after the exercise of reasonable diligence presentment as required by this Act cannot be made; (Section 82)
4) where the drawee is a fictitious person; (Section 82)
5) by waiver of presentment, express or implied. (Section 82)
6) when the instrument has been dishonored by non-acceptance. (Sec. 151)
When is the instrument considered dishonored by non-payment?
1) when it is duly presented for payment and payment is refused or cannot be obtained; or
2) when presentment is excused and the instrument is overdue and unpaid.
LIABILITY OF PERSON SECONDARILY LIABLE, WHEN INSTRUMENT DISHONORED — Subject to the provisions of this Act, when the instrument is
dishonored by non-payment, an immediate right of recourse to all parties secondarily liable thereon accrues to the holder. [84]
What is the effect of dishonor by non-payment to persons secondarily liable?
Persons secondarily liable become principal debtors, provided that notice of dishonor is given to them. If no notice of dishonor is given to them,
they are discharged. (Among themselves, persons secondarily liable are presumed liable in the order they become parties to the instrument. Thus if
F is the holder and he collects from D, D can collect from C, but not from E. [924])
What about the persons primarily liable, can you still charge them?
Yes they may be included as party defendants by the persons secondarily liable. So if the issue reaches the court, the court has several persons to
hold liable.
TIME OF MATURITY — Every negotiable instrument is payable at the time fixed therein without grace. When the day of maturity falls upon
Sunday, or a holiday, the instrument is payable on the next succeeding business day. Instruments falling due or becoming payable on Saturday
are to be presented for payment on the next succeeding business day, except that instruments payable on demand may, at the option of the
holder, be presented for payment before twelve o'clock noon on Saturday when that entire day is not a holiday. [85]
The instrument is payable on February 14, 2014. When is it supposed to be presented for payment?
Presentment for payment must be made on that date.
What if February 14 falls on a Sunday, when should it be paid?
It is payable on Monday or the succeeding business day. Presentment must therefore be made on that succeeding business day.
What if February 14 falls on a holiday?
It is payable on the succeeding business day.
What if February 14 falls on a Saturday?
1) where the instrument is payable at a fixed or determinable future time, presentment must be made on the next succeeding business day, that is
on Monday, February 16, 2014.
2) where the instrument is payable on demand, presentment must be made on Saturday, February 14, before 12:00 noon or Monday, February 16,
2014, at the option of the holder.
TIME; HOW COMPUTED — When the instrument is payable at a fixed period after date, after sight, or after that happening of a specified event,
the time of payment is determined by excluding the day from which the time is to begin to run, and by including the date of payment. [86]
How should you compute the time for payment?
The time of payment is determined by excluding the day from which the time is to begin to run, and by including the date of payment. [first day
excluded-last day included]
RULE WHERE INSTRUMENT PAYABLE AT BANK — Where the instrument is made payable at a bank it is equivalent to an order to the bank to pay
the same for the account of the principal debtor thereon. [87]
What is the rule if the instrument is made payable at the bank?
It is equivalent to an order to the bank to pay the same for the account of the principal debtor thereon.
For example, I promise to pay Mr. Garcia or order the sum of P1 million. Payable at BPI, Ayala Branch. (Sgd.) A:
This is equivalent to an order to pay addressed to BPI, Ayala Branch, by A, maker. BPU may charge the amount of the note from the account of A
without further authority from A.
What if there is a failure to make presentment for payment at PNB, is A, maker, discharged?
A is not discharged because he is primarily liable.
WHAT CONSTITUTES PAYMENT IN DUE COURSE — Payment is made in due course when it is made at or after the maturity of the instrument to
the holder thereof in good faith and without notice that his title is defective. [88]
What are the requisites for payment in due course?
Payment must be:

1) made at or after the date of maturity.
2) made to the holder.
3) made by the debtor in good faith and without notice that the holder’s title is defective.
What if it is paid prior to the date where it is supposed to be due?
It would be considered a negotiation back to the person primarily liable and he can re-negotiate it. The payment does not discharge the
instrument.
What is the effect if the instrument is paid to an indorsee who is not in possession of such instrument?
There is no payment in due course as he is not a holder.
SIR: We’ve learned that in fact, the instrument must be exhibited to the person from whom you are demanding payment in order for him to
determine the genuineness of the instrument and the right of the holder to receive payment.
What if the payment is made to a person by the debtor who knows that such person stole it?
It is not payment in due course as such payment is not in good faith.
X is indebted to Y. X gave Y a promissory note worth P1 million. Does the act of giving the promissory note produce the effect of payment?
No they produce the effect of payment only when they have been cashed or when through the fault of the creditor, they have been impaired.
(NCC)
TO WHOM NOTICE OF DISHONOR MUST BE GIVEN — Except as herein otherwise provided, when a negotiable instrument has been dishonored
by non-acceptance or non-payment, notice of dishonor must be given to the drawer and to each indorser, and any drawer or indorser to whom
such notice is not given is discharged. [89]
What is notice of dishonor?
It means bringing it either verbally or in writing, to the knowledge of the drawer or indorser of an instrument, the fact that a specified negotiable
instrument, upon proper proceedings taken, has not been accepted or has not been paid, and that the party notified is expected to pay it.
Is it necessary to give such notice?
Yes in order to charge to persons secondarily liable.
Who has the burden of proof that notice is given?
The plaintiff -- usually the holder or the indorser -- who seeks to enforce the defendant’s liability.
Is there a need to give notice to persons primarily liable?
No because the purpose of the notice is to inform the person of such dishonor and it would be STUPID to inform the very ones who dishonor the
instrument.
A made a promissory note making B as the payee. C is the indorsee and D is the holder. The note is payable in four installments (P1 million per
quarter). The amount of the note is P4 million. On the first quarter there was payment. There was no payment on the second, third and fourth
quarter. After the fourth quarter, the holder sent a notice of dishonor to B and C. May B and C be held liable?
They may be held liable only for the payment on the fourth quarter because each installment is equivalent to a separate obligation. For every
default on each installment, you are required to give a notice of dishonor. Since D did not give a notice of dishonor to B and C after no payment
was made on the second and third quarter, D can no longer enforce said amount as against B and C as they are considered as discharged.
What if there is an acceleration clause?
It would depend on whether the clause is optional or automatic. Where the acceleration clause is:
1) Automatic – failure to give notice of dishonor as to previous installment will discharge the persons secondarily liable as to the succeeding
installments.
2) Optional and it is:
a) exercised - failure to give notice of dishonor as to previous installment will discharge the persons secondarily liable as to the succeeding
installments.
b) not exercised - failure to give notice of dishonor as to previous installment will not discharge the persons secondarily liable as to the
succeeding installments.
Effect on failure to give notice of dishonor on previous installment (instrument payable in installments):
No acceleration clause With an acceleration clause
Automatic Optional
Exercised Not exercised
1) It does not discharge the drawers and indorsers as to It will discharge the persons It will discharge the It does not discharge
the succeeding installments. secondarily liable as to the persons secondarily liable the drawers and
2) The holder can file an action against them for such succeeding installments. as to the succeeding indorsers as to the
succeeding instruments provided that as to such installments. succeeding
succeeding installments, notice is given. (each installment installments.
is equivalent to a separate note)
Are there exceptions to the rule that failure to give notice to the drawer and indorser will discharge them?
Yes these exceptions are:

1) when notice is waived, express or implied. [109]
2) when notice of dishonor is dispensed with when, after the exercise of reasonable diligence, it cannot be given to or does not reach the parties
sought to be charged. [112]
As to drawer:
3) where the drawer and drawee are the same person. [114]
4) when the drawee is a fictitious person or a person not having capacity to contract. [114]
5) when the drawer is the person to whom the instrument is presented for payment. [114]
6) where the drawer has no right to expect or require that the drawee or acceptor will honor the instrument. [114]
7) where the drawer has countermanded payment. [114]
As to indorser:
8) where the drawee is a fictitious person or a person not having capacity to contract, and the indorser was aware of the fact at the time he
indorsed the instrument; [115]
9) where the indorser is the person to whom the instrument is presented for payment; [115]
10) where the instrument was made or accepted for the indorsers accommodation. [115]
Where due notice of dishonor by non-acceptance has been given:
11), notice of a subsequent dishonor by non-payment is not necessary, unless in the meantime the instrument has been accepted. [116]
As to a holder in due course without notice:
12) an omission to give notice of dishonor by non-acceptance does not prejudice the rights of a holder in due course subsequent to the omission.
[117]
BY WHOM GIVEN — The notice may be given by or on behalf of the holder, or by or on behalf of any party to the instrument who might be
compelled to pay it to the holder, and who, upon taking it up, would have a right to reimbursement from the party to whom the notice is given.
[90]
Who should give notice of dishonor?
It may be given by or on behalf of the holder, or by or on behalf of any party to the instrument who might be compelled to pay it to the holder and
who, upon taking it up, would have a right to reimbursement from the party to whom the notice is given.
A is the maker, B is the payee, C, D, and E are indorsees. F is the holder. When F tried to collect the said note from the maker, the maker did not
pay. F immediately sent a notice of dishonor to E, who was compelled to pay the amount to F. May E go after B, C, and D?
No because no notice of dishonor was given to them.
Who should give that notice of dishonor to them?
E may give such notice of dishonor to B, C, and D. Otherwise, B, C and D will be discharge.
SIR: If you are E and you know that there are prior parties who can be made liable to pay the amount of the said instrument, then upon receipt of
such notice of dishonor, you are not sure if the same notice of dishonor was also given by F to prior parties (B, C, D), the first thing you do is to
make also your notice of dishonor addressed to B, C, and D. Otherwise, if you did not do that and you were compelled by F to pay the amount of
the note, B, C and D are discharged of their duties and obligations as persons secondarily liable, and you have no other recourse but to go only to A.
And you know for a fact that A was not able to pay when F demanded payment.
NOTICE GIVEN BY AGENT — Notice of dishonor may be given by an agent either in his own name or in the name of any party entitled to give
notice, whether that party be his principal or not. [91]
May an agent give a notice of dishonor?
Yes it may be given by an agent either in his own name or in the name of any party entitled to give notice, whether that party be his principal or
not.
EFFECT OF NOTICE GIVEN ON BEHALF OF HOLDER — Where notice is given by or on behalf of the holder, it inures for the benefit of all
subsequent holders and all prior parties who have a right of recourse against the party to whom it is given. [92]
What is the effect if notice is given on behalf of holder?
It inures for the benefit of all subsequent holders and all prior parties who have a right of recourse against the party to whom it is given.
Give an example:
Suppose A makes a note payable to B or order. B negotiates to C, C to D, D to E and E to F. F notifies B, C, D and E.
The notice by F to B, inures to the benefit of C, D and E, as they are parties prior to F, holder, who have a right of recourse against B. And even if
they do not give notice to B, B is not discharged as to them and they can hold B liable on the basis of the notice given by F. If any of them is
compelled to pay, he can sue B without having the necessity of giving B another notice of dishonor.
SIR: In this example, if F, holder, gives a notice of dishonor to B, and E; and F was able to compel E to pay the amount. E may go after B because the
notice given by F to B inured to the benefit of E.
EFFECT WHERE NOTICE IS GIVEN BY PARTY ENTITLED THERETO — Where notice is given by or on behalf of a party entitled to give notice, it
inures for the benefit of the holder and all parties subsequent to the party to whom notice is given. [93] NOTICE IS GIVEN BY ANY PARTY TO
THE INSTRUMENT WHO MIGHT BE COMPELLED TO PAY IT TO THE HOLDER, AND WHO WOULD HAVE A RIGHT TO REIMBURSEMENT FROM THE
PARTY TO WHOM THE NOTICE IS GIVEN.
What is the effect if notice is given by or on behalf of a party entitled to give notice?
It inures for the benefit of the holder and all parties subsequent to the party to whom notice is given.
Give an example:
Suppose A makes a note payable to B or order. B negotiates to C, C to D, D to E and E to F. F compelled E to pay. E then gives notice only to B.
1) Such notice by E to B inures to the benefit of F, the holder, and C and D, parties subsequent to the party (B) to whom notice was given.
2) As to F, B is not discharged and F can hold B liable, even if F has not given notice to B.
3) As to C and D, B is not discharged and they can hold B liable, even if they have not given notice to B.
WHEN AGENT MAY GIVE NOTICE — Where the instrument has been dishonored in the hands of an agent, he may either himself give notice to
the parties liable thereon, or he may give notice to his principal. If he give notice to his principal, he must do so within the same time as if he
were the holder, and the principal upon the receipt of such notice has himself the same time for giving notice as if the agent had been an
independent holder. [94]
What should the agent do if the instrument has been dishonored in the hands?
He may either himself give notice to the parties liable thereon, or he may give notice to his principal. If he give notice to his principal, he must do so
within the same time as if he were the holder, and the principal upon the receipt of such notice has himself the same time for giving notice as if the
agent had been an independent holder.
WHEN NOTICE SUFFICIENT — A written notice need not be signed, and an insufficient written notice may be supplemented and validated by
verbal communication. A misdescription of the instrument does not vitiate the notice unless the party to whom the notice is given is in fact
misled thereby. [95]
Should a notice be signed?
No a written notice need not be signed.
Can an insufficient written notice be supplemented and validated by verbal communication?
Yes the insufficiency can be supplemented by oral communication stating the things lacking.
Does a misdescription of the instrument does not vitiate the notice?
No it does not vitiate the notice unless the party to whom the notice is given is in fact misled thereby.
FORM OF NOTICE — The notice may be in writing or merely oral and may be given in any terms which sufficiently identify the instrument and
indicate that it has been dishonored by non-acceptance or non-payment. It may in all cases be given by delivering it personally or through the
mails. [96]
What is the required form of notice?
The notice may be in writing or merely ORAL and may be given in any terms which sufficiently identify the instrument and indicate that it has been
dishonored by non-acceptance or non-payment
Can you send a notice via a text message?
Yes as long as the notice, whether written or oral, contain the following:
1) sufficient description of the instrument to identify it.
2) a statement that is has been presented for payment or for acceptance and that is has been dishonored.
3) a statement that the party giving notice intends to look for the party addressed for payment
How about Skype?
Yes because notice can be given orally.
What if it is sent through a private message on your Friendster?
Yes as long as the notice contain the following:

1) sufficient description of the instrument to identify it.
2) a statement that is has been presented for payment or for acceptance and that is has been dishonored.
3) a statement that the party giving notice intends to look for the party addressed for payment
How about a buzz through Yahoo Messenger?
Wala ni gi ask ni Sir. I just wrote this to waste 3 precious seconds of your life.
How about a notice by phone?
Yes because notice can be given orally. However, it must be clearly shown that the party to be notified was really communicated with, i.e., fully
identified as the party at the receiving end of the line.
SIR: Because of the advent of new technologies, I believe we can use these technologies in giving the notice of dishonor. For as long as you can
prove notice was given. This is unlike the requirement under presentment for payment wherein there must be actual exhibition of the instrument.
Besides, it is the burden of the person giving notice to prove to the court that indeed such notice was given to person secondarily liable.
TO WHOM NOTICE MAY BE GIVEN. — Notice of dishonor may be given either to the party himself or to his agent in that behalf. [97]
To whom should notice be given?
Notice of dishonor may be given either to the party himself or to his agent in that behalf.
SECTION 98.Notice Where Party is Dead. — When any party is dead, and his death is known to the party giving notice, the notice must be given
to a personal representative, if there be one, and if with reasonable diligence he can be found. If there be no personal representative, notice
may be sent to the last residence or last place of business of the deceased.
What if the party decided to transfer his residence 6 feet below the ground?
Notice must be given to a personal representative, if there be one, and if with reasonable diligence he can be found. If there be no personal
representative, notice may be sent to the last residence or last place of business of the deceased.
Under what circumstances can you send a notice to the last residence or last place of business of the deceased?
1) if his death is not known to the party giving notice; or

2) although his death is known to the party giving notice, but there is no personal representative; or
3) if there is one but he cannot be found with reasonable diligence.
NOTICE TO PARTNERS — When the parties to be notified are partners, notice to any one partner is notice to the firm even though there has
been a dissolution. (99)
What is the effect of giving notice to a partner in a partnership?
Notice to any one partner is notice to the other partners of the firm even though there has been a dissolution.
NOTICE TO PERSONS JOINTLY LIABLE. — Notice to joint parties who are not partners must be given to each of them, unless one of them has
authority to receive such notice for the others. (100)
How do you give notice to persons jointly liable?
Notice must be given to each of them, unless one of them has authority to receive such notice for the others.
NOTICE TO BANKRUPT. — Where a party has been adjudged a bankrupt or an insolvent, or has made an assignment for the benefit of creditors,
notice may be given either to the party himself or to his trustee or assignee. [101]
How do you give notice to a bankrupt or insolvent party?
Notice may be given either to the party himself or to his trustee or assignee.
TIME WITHIN WHICH NOTICE MUST BE GIVEN. — Notice may be given as soon as the instrument is dishonored; and unless delay is excused as
hereinafter provided, must be given within the times fixed by this Act. [102]
When do you give a notice of dishonor?
Notice may be given as soon as the instrument is dishonored. (The time for giving notice is fixed in Sections 103, 104, and107.)
A promissory note is said to be due on February 21, 2014. Thereafter, the holder who is in dire need of the money, presented it for payment on
February 20, 2014. Can the holder present it for payment to the maker on February 20, 2014?
No because where an instrument is payable at a fixed date, presentment must be made on the day it falls due. [71] However, if such maker will pay
you then it would be considered a negotiation back to the person primarily liable and he can re-negotiate it. The payment does not discharge the
instrument. [932(1)]
Supposing that the holder presented it for payment on February 20, 2014 and the maker will not pay, can the holder send a notice of dishonor
to the parties secondarily liable?
No because such notice would be insufficient because an instrument cannot be said to be dishonored for non-payment unless presented, and
presentment must be made on the date of maturity unless presentment is excused.
What if the notice of dishonor was made on February 21, 2014, the date of its maturity, is that allowed?
Yes, provided that the instrument has been presented for payment and it has been dishonored.
What if the instrument is payable at the bank?
It is not dishonored if the maker deposits the amount of the instrument before the close of banking hours. Hence, notice of dishonor must be given
after the close of banking hours.
Why is it that the notice must be sent promptly?
To give persons secondarily liable every opportunity to secure themselves such as, to enable the party to be charged to preserve and protect his
rights against prior parties.
WHERE PARTIES RESIDE IN SAME PLACE. — Where the person giving and the person to receive notice reside in the same place, notice must be
given within the following times:
(a)If given at the place of business of the person to receive notice, it must be given before the close of business hours on the day following.
(b)If given at his residence, it must be given before the usual hours of rest of the day following.
(c)If sent by mail, it must be deposited in the post-office in time to reach him in usual course on the day following. [103]
When do you give the notice if the parties reside in the same place?
1) if given at the place of business of the person to receive notice, it must be given before the close of business hours on the day following.
2) if given at his residence, it must be given before the usual hours of rest of the day following.
3)If sent by mail, it must be deposited in the post-office in time to reach him in usual course on the day following.
Supposing that presentment for payment has been done and the maker said he will not pay. In order to charge the person secondarily liable,
when should notice be made if he opts to send the notice by mail?
If sent by mail, it must be deposited in the post-office in time to reach him in usual course on the day following.
What if I receive such notice that the maker will not pay at 4 o’clock in the afternoon on February 19, 2014. Are you telling me that I have to
immediately go to the postal office?
If there is no mail at such hour on February 19, 2014, the notice may be deposited in the mails by the next mail thereafter.
WHERE PARTIES RESIDE IN DIFFERENT PLACES. — Where the person giving and the person to receive notice reside in different places, the notice
must be given within the following times:
(a)If sent by mail, it must be deposited in the post-office in time to go by mail the day following the day of dishonor, or if there be no mail at a
convenient hour on that day, by the next mail thereafter.
(b)If given otherwise than through the post-office, then within the time that notice would have been received in due course of mail, if it had
been deposited in the post-office within the time specified in the last subdivision. [104]
When do you give the notice if the parties reside in different places?
1) if sent by mail, it must be deposited in the post-office in time to go by mail the day following the day of dishonor, or if there be no mail at a
convenient hour on that day, by the next mail thereafter.
2) if given otherwise than through the post-office, then within the time that notice would have been received in due course of mail, if it had been
deposited in the post-office within the time specified in the last subdivision.
Can you send it through a private courier like DHL, is that allowed?
Yes because it may be given otherwise than through the post-office,
What is meant by “same place”?
It refers to the corporate limits of a town or city where the presentment is made or where the holder resides.
What if you live in at two adjacent barangay, one belonging to Cebu City and the other to Mandaue City, do you live in the same place?
No
What is the effect if notice is given out of time?
It would be considered not to have been given, unless presentment is excused. Hence, the party to receive such notice would be discharged.
So you are telling me that the law provides for the time frame?
Yes
WHEN SENDER DEEMED TO HAVE GIVEN DUE NOTICE. — Where notice of dishonor is duly addressed and deposited in the post-office, the
sender is deemed to have given due notice, notwithstanding any miscarriage in the mails. [105]
What is the legal effect if the notice where notice of dishonor is duly addressed and deposited in the post-office?
The sender is deemed to have given due notice, notwithstanding any miscarriage in the mails.
Is the presumption conclusive?
Yes if not rebutted, or at least, contradicted.
DEPOSIT IN POST-OFFICE; WHAT CONSTITUTES. — Notice is deemed to have been deposited in the post-office when deposited in any branch
post-office or in any letter box under the control of the post-office department. [106]
When is the notice deemed to have been deposited in the post-office?
When deposited in any branch post-office or in any letter box under the control of the post-office department.
NOTICE OF SUBSEQUENT PARTY; TIME OF. — Where a party receives notice of dishonor, he has, after the receipt of such notice, the same time
for giving notice to antecedent parties that the holder has after the dishonor. [107]
When should the party who receives the notice of dishonor give notice to antecedent parties?
The same time for giving notice to antecedent parties that the holder has after the dishonor.
WHERE NOTICE MUST BE SENT — Where a party has added an address to his signature, notice of dishonor must be sent to that address; but if
he has not given such address, then the notice must be sent as follows:
(a)Either to the post-office nearest to his place of residence or to the post-office where he is accustomed to receive his letters; or
(b)If he lives in one place, and has his place of business in another, notice may be sent to either place; or
(c)If he is sojourning in another place, notice may be sent to the place where he is so sojourning.
But where the notice is actually received by the party within the time specified in this Act, it will be sufficient, though not sent in accordance
with the requirement of this section. [108]
Where should the notice of dishonor be sent?
Where a party has added an address to his signature, notice of dishonor must be sent to that address; but if he has not given such address, then
the notice must be sent as follows:
1) either to the post-office nearest to his place of residence or to the post-office where he is accustomed to receive his letters; or
2) if he lives in one place, and has his place of business in another, notice may be sent to either place; or
3) if he is sojourning in another place, notice may be sent to the place where he is so sojourning.
But where the notice is actually received by the party within the time specified in this Act, it will be sufficient, though not sent in accordance with
the requirement of this section.
WAIVER OF NOTICE — Notice of dishonor may be waived, either before the time of giving notice has arrived or after the omission to give due
notice, and the waiver may be express or implied. [109]
Can a notice of dishonor be waived?
Sí.
Why can he waive such notice of dishonor?
Because the law says so tell this to Waldemar.
When can you waive such notice of dishonor?
1) before the time of notice, such as express waiver in the body of the instrument or added to the signature of the party;
2) after the omission to give due notice.
What is an express waiver?
A waiver which is expressly written or printed in the body of the instrument.
What is an implied waiver?
A waiver which may be inferred from the acts, declarations or silence of the person to whom such instrument is presented for payment.
WHOM AFFECTED BY WAIVER — Where the waiver is embodied in the instrument itself, it is binding upon all parties; but, where it is written
above the signature of an indorser, it binds him only. [110]
To whom is the waiver binding?
1) where the waiver is embodied in the instrument itself, it is binding upon all parties.
2) where it is written above the signature of an indorser, it binds him only.
Give an example where waiver is in the instrument itself:
To C. Pay to X or order P1000. Notice of dishonor waived. (Sgd.) Y
What if the waiver is written above the signature of the indorser?
Only such indorser is bound by the waiver. If there are other indorsers and no notice is given to such indorsers, they are discharged.
WAIVER OF PROTEST — A waiver of protest, whether in the case of a foreign bill of exchange or other negotiable instrument, is deemed to be a
waiver not only of a formal protest, but also of presentment and notice of dishonor. [111]
What is the effect of waiver of protest?
Presentment for payment and notice of dishonor are also waived.
What is the effect of waiver of presentment for payment?
Notice of dishonor is also waived.
WHEN NOTICE IS DISPENSED WITH — Notice of dishonor is dispensed with when, after the exercise of reasonable diligence, it can not be given
to or does not reach the parties sought to be charged. [112]
When is notice of dishonor dispense with?
Where after the exercise of reasonable diligence, it cannot be given to or does not reach the parties sought to be charged.
Give examples on when notice is excused:
1) when political disturbance interrupt the ordinary negotiation of trades.

2) military operations or interdictions of commerce.
3) prevalence of malignant, contagious or infectious disease which has become so extensive as to suspend all commercial business and
INTERCOURSE.
DELAY IN GIVING NOTICE; HOW EXCUSED — Delay in giving notice of dishonor is excused when the delay is caused by circumstances beyond the
control of the holder, and not imputable to his default, misconduct, or negligence. When the cause of delay ceases to operate, notice must be
given with reasonable diligence. [113]
When is the delay of giving notice excused?
When the delay is caused by circumstances beyond the control of the holder, and not imputable to his negligence, misconduct, or default.
Give an example when delay in giving notice is excused:
Delay caused by inquiries as to the address of the party to receive notice where the holder does not know the address.
WHEN NOTICE NEED NOT BE GIVEN TO DRAWER — Notice of dishonor is not required to be given to the drawer in either of the following cases:
(a)Where the drawer and drawee are the same person.
(b)When the drawee is a fictitious person or a person not having capacity to contract.
(c)When the drawer is the person to whom the instrument is presented for payment.
(d)Where the drawer has no right to expect or require that the drawee or acceptor will honor the instrument.
(e)Where the drawer has countermanded payment. [114]
Is notice of dishonor required to discharge the drawer?
Oui.
Notice of dishonor is not required to be given to the drawer in either of the following cases:
1) where the drawer and drawee are the same person.
2) when the drawee is a fictitious person or a person not having capacity to contract.
3) when the drawer is the person to whom the instrument is presented for payment.
4) where the drawer has no right to expect or require that the drawee or acceptor will honor the instrument.
5) where the drawer has countermanded payment.
Give an example where the drawer and drawee are the same person:
A is both the drawer and the drawee of the bill.
Give an example where drawee is a fictitious person:
Pay to X or order P1000 payable on demand.

To Carmen Sandiego (Sgd.) Q
Give an example where the drawer is the person to whom the instrument is presented for payment:
A, the drawer; B, payee. X is the drawee. Note is payable at the office of A. B indorses to C, C to D, D to E, E to F, holder. F makes presentment at
A’s office. X is not there but A is there. F need not give notice to A, as the latter knows already of the dishonor.
Give an example where the drawer has no right to expect or require that the drawee or acceptor will honor the instrument:
Where the drawer of a check has no account with the drawee bank.
Give an example where the drawer has countermanded payment:
A, drawer, tells the drawee X not to pay the bill. F, holder need not give notice to A, drawer.
WHEN NOTICE NEED NOT BE GIVEN TO INDORSER — Notice of dishonor is not required to be given to an indorser in either of the following
cases:
(a)Where the drawee is a fictitious person or a person not having capacity to contract, and the indorser was aware of the fact at the time he
indorsed the instrument;
(b)Where the indorser is the person to whom the instrument is presented for payment;
(c)Where the instrument was made or accepted for his accommodation. (115)
Is notice of dishonor required to charge the indorser? Why?
Yes because they are secondarily liable on the instrument
1) where the drawee is a fictitious person or a person not having capacity to contract, and the indorser was aware of the fact at the time he
indorsed the instrument;
2) where the indorser is the person to whom the instrument is presented for payment;
3) where the instrument was made or accepted for his accommodation
Z, a partnership, made a note. It was negotiated to several persons. One of the indorsers is X, a partner to the Z partnership. Is presentment for
payment made to one of the partners sufficient? Is there a need for the holder to send a notice of dishonor of X?
Isn’t it that X already has knowledge? What makes it different from the other examples before?
SIR:There is no need. The example given in the book presupposes that the presentment for payment was not made by the same partner who is one
of the indorsers. It presupposes that a partnership is the maker and one of the indorsers is a partner. If its presented for payment to the
partnership by some other partners, still you have to give a notice of dishonor to partner who indorsed the same instrument. However, if you
present it for payment to the same partner who is also one of the indorsers, then there is no need to give him a notice of dishonor.
NOTICE OF NON-PAYMENT WHERE ACCEPTANCE REFUSED — Where due notice of dishonor by non-acceptance has been given, notice of a
subsequent dishonor by non-payment is not necessary, unless in the meantime the instrument has been accepted.(116)
Is there a need to give a notice of dishonor by non-payment if the notice of dishonor by non-acceptance was already given?
No it is not necessary unless the instrument has been accepted
Give an example:
A, drawer, draw a bill payable on February 28, 2014. On February 1, 2014, B, holder presents it for acceptance to X, drawee, who refuses to accept
the bill. B negotiated the note to C, C to D, D to E, E to F, F is now the holder. on February 15, 2014, F presented it for acceptance to X, who now
accepts the bill and became an acceptor. On February 28, 2014, the holder presented it for payment to X, the acceptor, who refuses to pay. F must
give notice of dishonor to A, B, C, D, and E, in order to charge them as “in the meantime the instrument has been accepted”.
So there were two presentment for acceptance?
Yes
SIR: There is a need for you to give a notice of dishonor because the instrument was accepted by the drawee who initially refused to accept the
said instrument. So if it will be dishonored upon presentment for payment, then there is a need for the said HOLDER to send notice of dishonor by
non-payment to persons secondarily liable.
What is meant by he has accepted the instrument in the meantime?
What are the instances wherein the instrument must be presented for acceptance?
Presentment for acceptance must be made:

1) where the bill is payable after sight, or in any other case, where presentment for acceptance is necessary in order to fix the maturity of the
instrument; or
2) where the bill expressly stipulates that it shall be presented for acceptance; or
3) where the bill is drawn payable elsewhere than at the residence or place of business of the drawee. (143)
EFFECT OF OMISSION TO GIVE NOTICE OF NON-ACCEPTANCE — An omission to give notice of dishonor by non-acceptance does not prejudice
the rights of a holder in due course subsequent to the omission. (117)
What is the effect of omission to give notice of dishonor by non-acceptance to a holder in due course?
It does not prejudice the rights of a holder in due course subsequent to the omission
Give an example:
A, drawer, B, payee, X, drawee. The bill is payable on February 28, 2014. It is successively indorsed it to C, D, E, and F, holder. X refuses to accept
the bill. F fails to give notice to B, C, D, and E. F then negotiates the note to G, a holder in due course. As to such holder in due course, B, C, D and E
are not discharged because omission to give notice of dishonor by non-acceptance does not prejudice the rights of a holder in due course
subsequent to the omission.
WHEN PROTEST NEED NOT BE MADE; WHEN MUST BE MADE — Where any negotiable instrument has been dishonored it may be protested for
non-acceptance or non-payment, as the case may be; but protest is not required except in the case of foreign bills of exchange. (118)
When is it necessary to make a protest?
Protest is necessary for foreign bills of exchange
Why?
Because it is required under Section 118 of the NIL
INSTRUMENT; HOW DISCHARGED. — A negotiable instrument is discharged —

(a)By payment in due course by or on behalf of the principal debtor;
(b)By payment in due course by the party accommodated, where the instrument is made or accepted for accommodation;
(c)By the intentional cancellation thereof by the holder;
(d)By any other act which will discharge a simple contract for the payment of money;
(e)When the principal debtor becomes the holder of the instrument at or after maturity in his own right. (119)
When is a negotiable instrument discharged?
1) by payment in due course by or on behalf of the principal debtor;

2) by payment in due course by the party accommodated, where the instrument is made or accepted for accommodation;
3) by the intentional cancellation thereof by the holder;
4) by any other act which will discharge a simple contract for the payment of money;
5) when the principal debtor becomes the holder of the instrument at or after maturity in his own right.
What is meant by payment in due course?
Payment made at or after the maturity of the instrument to the holder thereof in good faith and without notice that his title is defective.
What is the effect if a third party pays the instrument?
The instrument is not discharged and can be renegotiated by the person paying the holder.
*Supposing that the instrument in the hands of the holder is already due for payment. Here comes X wanting to pay the value of the instrument
because prior parties are his friends; in order to surprise his friends, to show that he is a friend of these persons, X paid the holder of the
instrument. What is the effect?
The instrument is not discharged because X is not a party to the negotiable instrument.
*Are you saying it can be re-negotiated by such third person even if it is overdue?
*SIR: Yes, subject to the defenses available to the maker and it can be re-negotiated by such third person and the person who later on accepts such
instrument knowing it is already overdue is not a holder in due course. However, if you convince that third person and that third person paid the
instrument to the holder at the time it was due (it matured?), hence, he can re-negotiate it because the instrument is considered as not yet
discharged.
*What if the person simply kept it, because his intention is to free all those persons prior to the holder?
Still the instrument is not discharge.
*What if the instrument was burned by the third person?
He better clean up his mess. It depends on the intention of such third person.
What is the effect of payment made by an accommodation party?
It does not discharge the instrument
What is the effect of payment made by a person secondarily liable?
It does not discharge the instrument
Who is a principal debtor?
It refers to person ultimately bound to pay the debt. This is true whether he is a party to the instrument or not, or whether he appears to be
primarily or secondarily liable on the instrument.
*Going back to our example a while ago, that third person who paid the instrument and who wanted to discharge the instrument. Can we not
consider such person as a person paying for and behalf of the principal debtor because his intention was to free all his friend who are
secondarily liable?
No because he is paying for and behalf of he persons secondarily liable and not the principal debtor.
When does the delivery of instrument produce the effect of payment?
1) when they have actually be cashed; or

2) when through the fault of the creditor, they have been impaired.
What are the requisites of a valid cancellation of an instrument?
The cancellation must be:

1) intentional
2) by the holder
What the effect if the cancellation is not intentional?
The instrument is not discharged.
What if it’s made by a person who is not a holder of the said instrument?
The instrument is not discharged.
How do you cancel an instrument?
Cancellation may be done by

1) tearing the instrument up,
2) burning it or
3) writing across it the word “cancel”
For example, here is A who is using the comfort room, without a toilet paper. So he uses the instrument. Is the instrument discharged?
No because he has no intention of cancelling the instrument
What are the other acts which will discharge the instrument?
Novation will discharge the instrument.
What is novation?
The substitution of a new contract for an old one.
M, the maker, made a note which is due and demandable on February 25, 2014. However, the holder extended the maturity to March 25, 2014.
Is the instrument discharge?
No because an extension of time by the holder will not discharge the instrument.
What are the requisites to in order to discharge an instrument when the principal debtor becomes the holder? 1019
Reacquisition must be:

1) by the principal debtor
2) in his own right
3) at or after the date of maturity.
Can you give an example of the last circumstance under Section 199 in order to discharge the instrument?
A is the maker. F, holder owes money to A, the principal debtor. F, instead of paying money, negotiated the instrument back to A.
*Supposing that there is a promissory note made by A which due and demandable on March 25, 2014. It was negotiated until it reached F, the
holder. On December 25, 2013, F went back to A and told the latter that he does not have any money this holiday and so A paid the instrument;
The maker simply kept the instrument instead of negotiating it. The instrument was in A’s hand on the date of maturity, i.e, March 25, 2014.
A reacquisition by the principal debtor before the maturity will not discharge the instrument. It will merely constitute a negotiation back to the
principal debtor who may renegotiate the instrument.
*On March 26, 2014, A did not renegotiate the instrument because he has no intention of doing so. What is the effect? Will it not be discharge?
The instrument is not discharged because the holder did not reacquire the instrument at or after maturity.
Can we not use (c)?
If the intention of A as a holder, is to cancel the instrument, the instrument is discharged.
Can an instrument be discharge by operation of law?
Yes.
Give an examples of discharge by operation of law:
1) discharge by reason of bankruptcy

2) discharge of a party not given due notice of dishonor
3) discharge by the Statute of Limitations
WHEN PERSONS SECONDARILY LIABLE ON, DISCHARGED — A person secondarily liable on the instrument is discharged —
(a)By any act which discharges the instrument;
(b)By the intentional cancellation of his signature by the holder;
(c)By the discharge of a prior party;
(d)By a valid tender of payment made by a prior party;
(e)By a release of the principal debtor, unless the holder's right of recourse against the party secondarily liable is expressly reserved;
(f)By any agreement binding upon the holder to extend the time of payment, or to postpone the holder's right to enforce the instrument, unless
made with the assent of the party secondarily liable, or unless the right of recourse against such party is expressly reserved. (120)
When is a person secondarily liable on the instrument discharged? when the instrument is discharged under 119; 120
1) by any act which discharges the instrument;

2) by the intentional cancellation of his signature by the holder;
3) by the discharge of a prior party;
4) by a valid tender of payment made by a prior party;
5) by a release of the principal debtor, unless the holder's right of recourse against the party secondarily liable is expressly reserved;
6) by any agreement binding upon the holder to extend the time of payment, or to postpone the holder's right to enforce the instrument, unless
made with the assent of the party secondarily liable, or unless the right of recourse against such party is expressly reserved.
Give an example of any act which discharges the instrument:
Payment in due course by the principal debtor
Give an example of intentional cancellation of his signature by the holder:
A, maker, B, payee. The note is successively indorsed to C, D, E, and F, holder. F then intentionally cancels the signature of D. D is discharged. No
consideration is necessary to support a discharge under this instance.
Give an example of a discharge of a prior party:
Using the example above, the intentional cancellation of D’s signature also discharges E, as D is a party prior to E. And according to this paragraph,
the discharge of a prior party discharges parties subsequent thereto. The reason is that if E were not discharged by the discharge of D, and he is
made to pay by F, holder, he would not be able to enforce his recourse against D.
Supposing that A, maker, B, payee. The note was successively indorsed to C, D, E, and F, holder. F sent a notice of dishonor to C, D, and E,
without sending a notice to B. What is the effect with respect to B?
As an indorser to whom such notice is not given, B is discharged.
Considering that B is discharged, are the subsequent parties also discharged?
No prior parties are not discharged. A discharge by prior party referred under Section 120(c) must be one that arises from the act of the holder,
such as the intentional cancellation of the signature of a person secondarily liable by the holder. It does not refer to a discharge by operation of law
such as a 1) discharge of a party not given due notice of dishonor or 2) a discharge by the Statute of Limitations.
SIR: The discharge of prior party must be from the act of the holder (the discharge must be the act of the holder). If the intention of F is to
discharge B, then all subsequent parties are also discharge. However, if it is by operation of law, like when F did not give such notice of dishonor to
B, while he give notice of dishonor to parties subsequent to B, these subsequent parties cannot claim to be discharge by saying that they cannot
hold B liable.
What is a tender of payment?
It means the act by which one produces and offers to a person holding a claim or demand against him the amount of money which he considered
and admits to be due, in satisfaction of such claim or demand without any stipulation or condition.
Give an example of a release of principal debtor (maker) unless the holder’s right of recourse against parties secondarily is expressly reserved:
Using the same example above, if F release A, the maker, the persons secondarily liable, B, C, D, and E, are also discharged, as (1) this discharges
the instrument and (2) deprives them of their right of recourse against A, maker. But if on releasing A, the holder F reserves his right of recourse
against the parties secondarily liable, they are not discharged. The reason is that the effect of such reservation is the implied reservation of their
(BCDE) right of recourse against A. In other words, while the holder cannot hold A liable, F can hold B, C, D, and E liable, but they can hold A liable
should any of them be made to pay by F. This reservation must be express.
RIGHT OF PARTY WHO DISCHARGES INSTRUMENT — Where the instrument is paid by a party secondarily liable thereon, it is not discharged; but
the party so paying it is remitted to his former rights as regard all prior parties, and he may strike out his own and all subsequent indorsements,
and again negotiate the instrument, except —
(a)Where it is payable to the order of a third person, and has been paid by the drawer; and
(b)Where it was made or accepted for accommodation, and has been paid by the party accommodated. (121)
What are the effects if the person secondarily liable pays the instrument?
1) the instrument is not discharged but it discharges the party paying.

2) she is remitted to her former rights as regard all prior parties.
3) she may strike out her own and all subsequent indorsements
4) she can renegotiate the instrument.
What are the exceptions to right to renegotiate?
1) where it is payable to the order of a third person, and has been paid by the drawer; and
2) where it was made or accepted for accommodation, and has been paid by the party accommodated.
RENUNCIATION BY HOLDER — The holder may expressly renounce his rights against any party to the instrument before, at, or after its maturity.
An absolute and unconditional renunciation of his rights against the principal debtor made at or after the maturity of the instrument discharges
the instrument. But a renunciation does not affect the rights of a holder in due course without notice. A renunciation must be in writing, unless
the instrument is delivered up to the person primarily liable thereon. (122)
What is meant by renunciation?
The act of surrendering a right or claim without recompense but it can be applied with equal propriety to the relinquishing of a demand upon an
agreement supported by a consideration.
What are the forms of renunciation?
Renunciation must be:

1) express
2) in writing
What is the exception?
When the instrument is delivered to the person primarily liable, the renunciation may be ORAL.
When should renunciation be made?
Renunciation may be made by the holder:

1) before maturity
2) at maturity
3) after maturity
When does renunciation discharge the instrument?
When it is:
1) absolute and unconditional
2) made in favor of the person primarily liable
3) made at or after the maturity.
What if it is made by the drawer?
Renunciation may only be made by the holder.
What if the renunciation was made in favor of the drawer?
It does not discharge the instrument because the drawer is not a person primarily liable on the instrument.
What if the renunciation was made in favor of the indorser?
It does not discharge the instrument because an indorser is not a person primarily liable on the instrument.
Who is the principal debtor?
The acceptor.
How about the drawee?
No because he is not even a party.
CANCELLATION; UNINTENTIONAL; BURDEN OF PROOF . — A cancellation made unintentionally, or under a mistake or without the authority of
the holder, is inoperative, but where an instrument or any signature thereon appears to have been cancelled the burden of proof lies on the
party who alleges that the cancellation was made unintentionally, or under a mistake or without authority. (123)
What is cancellation?
Any act which signifies the intention of the holder to cancel the instrument.
How do you cancel an instrument?
By drawing criss-cross lines, tearing, obliterations, erasures or burning. It may be made by any other means by which the intention to cancel
instrument may be evident.
When is cancellation considered inoperative?
When:
1) made unintentionally
2) made under mistake
3) made without the authority of the holder.
Who has the burden of proof that the cancellation was made unintentionally, or under a mistake or without authority?
The party claiming that the cancellation is inoperative.

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Negotiable Instruments Law Pre-finals Transcript. For Personal Use Only.

What is the engagement made by the maker in making the instrument?

The maker engages that he will pay it according to its tenor.pr

Is the liability of the maker primary?

Yes, the maker’s liability is primarily and unconditional.

Why is his liability primary?

What is the liability of two or more makers?

If they signed jointly and severally, what is their liability?

By signing a bill what is deemed admitted by the drawer?

Is the drawer primarily liable?

The drawer engages:

To whom is the drawer considered secondarily liable?

The drawer is secondarily to:

A draws a bill against X, as drawee payable to B or order. B negotiates to C, C to D, D to E, and E to F.

Technically, when do you consider the drawer secondarily liable?

Prior to drawee’s acceptance After drawee’s acceptance

Will it affect the negotiability of the instrument?

No because all the requisites of Section 1 of the NIL are present

Which element of Section 1 is appropriate in our study of Section 61?

What is the engagement made by the acceptor?

What are the admission of an acceptor when he signs as an acceptor of a bill?

The acceptor admits:

What is the liability of the acceptor?

Is an acceptor a party to the instrument?

To whom is the acceptor liable?

Do we have another view on this?

Yes, that the original tenor is the tenor of acceptance.

Which view should we apply?

The drawee bank is principally liable.

What are the effects of an acceptor’s admission?

The acceptor is consequently precluded from setting up the defense that:

When is a person deemed an indorser?

Who is an irregular indorser?

Why is such person considered irregular or anomalous indorser?

He indorses in an unsual, singular or peculiar manner.

Given an example of an irregular indorser?

What is the meaning of “before delivery”?

What are the rules on irregular indorsement?

Give an example of an instrument payable to the order of a third person:

Give an illustration of an irregular for accommodation of payee:

If the negotiation is by mere delivery, to whom does the warranty extend?

The warranty extends only to the immediate transferee.

May D enforce the said instrument against C?

May D collect the said amount from B?

Who is a qualified indorser?

They are secondarily liable.

What are the warranties made by a general indorser?

What is the engagement of a general indorser?

METROPOL vs. SAMBOK MOTORS CO.

ISSUE: Whether Sampol is a qualfified indorser

MARALIT vs. IMPERIAL

What is the defense raised by Imperial?

Why was Sapiera held liable by the Supreme Court?

Was Sapiera considered a general indorser?

BPI vs. CA and NAPIZA

Was Napiza considered a general indorser in this case?

What is the proximate cause of the loss?

What if in that example C is a qualified indorser?

Suppose C is a general indorser, may D make him liable at all times?

No not at all times. D may make C liable only when D is a/an:

What is your basis for the 2nd instance?

Section 58 of the NIL.

What is the type of liability of a general indorser?