Lyka Rivera

3BSA5

Negotiable Instruments

ASSIGNMENT 3

1. Can a bill of exchange or a promissory note qualify as a negotiable instrument if: (a) It is not
dated? Explain. (b) The day of maturity and the month, but not the year of the its maturity, is
given? Discuss. (c) Or it is payable in to “cash”? Reasons; (d) It names two alternative drawees?
Explain. (e) It not state the place where it is made or payable? Discuss.

a. YES. Date is not a material particular required by Section 1 of NIL for the negotiability of an
instrument. The date in a bill or note is not necessary. Hence, the omission of the date will
not make the instrument non-negotiable. In such case, the instrument will be considered to
be dated as of the time it was issued. (Sec. 17[c].) An instrument has no inception until
delivery, (Sec. 190, par. 6.)
b. NO. The time for payment is not determinable in this case. The year is not stated.
c. YES. Section 9(d), NIL makes the instrument payable to bearer because the name of the
payee does not purport to be the name of any person. In Ang Tek Lian vs. CA [L-2516,
September 25, 1950)], the Supreme Court reasoned that “Under the Negotiable Instruments
Law (sec. 9 [d], a check drawn payable to the order of "cash" is a check payable to bearer,
and the bank may pay it to the person presenting it for payment without the drawer's
indorsement.”
d. NO. A bill may not be addressed to two or more drawees in the alternative or in succession,
to be negotiable (Section 128, NIL). To do so makes the order conditional.
e. YES. Section 1 of NIL does not require a negotiable instrument to specify the place where it
is made or drawn or where it is payable. However, Section 73 specifies where presentment
for payment should be made when the place of payment is not specified. An instrument is
presumed to have been made where it is dated. A note that does not specify the place of
payment is presumed to be payable at the place of residence of the maker. If the place of
execution or payment is not stated, it is presumed to be the maker's or drawer's place of
business or his home.

2. Richard Clinton makes a promissory note payable to bearer and delivers the same to Aurora
Page. Aurora Page, however, indorses it to X in this manner.

“Payable to X. Signed Aurora Page”

Later, without indorsing the promissory note, X transfers and delivers the same to Napoleon.
Richard Clinton subsequently dishonors the note. May Napoleon proceed against Richard Clinton
for the note?

Yes. Richard Clinton is liable to Napoleon under the promissory note. The note made by
Richard Clinton is a bearer instrument. Despite special indorsement made by Aurora Page
thereon, the note remained a bearer instrument and can be negotiated by mere delivery. When
 X delivered and transferred the note to Napoleon, the latter became a holder thereof. As such
holder, Napoleon can proceed against Richard Clinton

3. A treasury warrant was issued by Mr. PA in his capacity as disbursing office of the Food
Administration, a government instrumentality. The warrant states that it is “payable for
additional cash advances for the Food Program Campaign in La Union” and the amount stated
therein is “payable from the appropriation for food administration.” The warrant is now in the
hands of Mr. BA who claims to be a holder in due course. Can BA be considered a holder in due
course of a negotiable instrument?

Mr. BA cannot be considered a holder in due course because he is not a holder of the
treasury warrant. He cannot be a holder because the treasury warrant is not negotiable. The
promise to pay is conditional because the sum is payable out of a particular fund, that is, the
appropriation for food administration.

4. A bookstore received 5 postal money orders totaling P 1,000.00 as part of sales receipts, and
deposited the same with a bank. A day after, the bank tried to clear them with the Bureau of
Posts. It turned out, however, that the postal money orders were irregularly issued thereby
prompting Bureau of Post to serve notice upon all bank not to pay orders if presented for
payment. The Bureau of Post further informed that bank that the amount of P 1,000.00 had been
deducted from the bank’s clearing account for the same amount. A complaint was filed by the
bookstore against the Bureau of Post and the bank for the recovery of the sum of P 1,000 which
however, was dismissed by the trial court. The bookstore appealed contending that the postal
money orders are negotiable instruments and their nature could not have been affected by the
notice sent by the Bureau of Post to the banks. How would you resolve the controversy? Explain.

The contention of the bookstore that postal money orders are negotiable instruments
cannot be sustained. Postal money orders, being under the restrictions and limitations of the
postal laws, do not contain unconditional promise or order, as required by the Negotiable
Instruments Law (Sec. 1 & 3, NIL).