NEGO From the Discussions of Atty.
Ramon Edison Batacan
DECEMBER 11, 2020 [VIDEO]
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Fictitious Person
The word "fictitious" is not limited to a person having no real
existence, as otherwise the word "non-existing" would have been
sufficient without more. A fictitious person is meant to be one who,
though named or specified as payee in an instrument, has no right to
it because the maker or drawer so intended and it matters not,
therefore, whether the name of the payee used by him be that one
living or dead, or one who never existed.
Requisites:
1. Payee must be fictitious or non-existing.
2. The person making the instrument has knowledge of such fact.
3. There is no intention on the part of the maker to constitute the
payee, the holder thereof.
Thus, it is immaterial if the person named exists, as long as there is
knowledge on the part of the maker or drawer that the person is
fictitious or non-existent.
Non Existing Person
In this case, the payee named is one who does not exist and had
never existed. Since indorsement is obviously impossible, the
manifest intention of the drawer is to make the instrument a bearer
paper negotiable by delivery.
An instrument payable to a person who is already dead is payable to
bearer. Here, the maker or drawer intends that the payee shall have
no right or interest whatsoever in the instrument so that the
instrument is, in effect, payable to a nonentity.
Blank Indorsement
But a blank indorsement cannot make a non-negotiable instrument, it
is negotiable as a bearer instrument payable to a specified person,
otherwise, the person who last signed his name on the back of the
instrument would be able to change entirely the contract as entered
into between the parties and make the character of the instrument
depend upon the manner of the indorsement, and not upon the terms
expressed therein.
The word "indorsement/' as used in the law, refers only to negotiable
instruments.
Section 12. Ante-dated and post-dated.
The instrument is not invalid for the reason only that it is ante-
dated or post-dated, provided this is not done for illegal or
fraudulent purpose. The person to whom instrument so dated is
delivered acquires the title thereto as the date of delivery.
Meaning of ante-dating and post-dating.
(1) An instrument is ante-dated when it contains a date earlier that
the true date of its issuance. Thus, an instrument issued on July
30,2010 but is dated July 15,2010 is antedated.
(2) An instrument is post-dated when it contains a date later than the
true date of its issuance. It is just the reverse of an antedated
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instrument. In the example given, if the instrument was issued on
July 15,2010, but bears a date of July 30,2010, it is postdated.
Effects of Ante-Dating or Post-Dating
General Rule – It does not render the instrument invalid or non-
negotiable
• It may be negotiated before or after the date given
• As long as it is not negotiated after maturity
Exception – If it is done for an illegal or fraudulent purpose
Ante-dating or post-dating an instrument does not render it invalid or
non-negotiable by that fact alone, provided this is not done for an
illegal or fraudulent purpose. It may be negotiated before or after the
date given as long as it is not negotiated after its maturity.
If the ante-dating or post-dating is done for an illegal or fraudulent
purpose, the instrument is rendered invalid.
Section 13. When date may be inserted.
Where an instrument expressed to be payable at a fixed period
after date is issued undated, or where the acceptance of an
instrument payable at a fixed period after sight is undated, any
holder may insert therein the true date of issue or acceptance,
and the instrument shall be payable accordingly. The insertion of
a wrong date does not avoid the instrument in the hands of a
subsequent holder in due course; but as to him, the date so
inserted is to be regarded as the true date.
When date may be inserted.
(1) Two instances. — This section which authorizes the holder to put
a date on an instrument, refers to two cases, namely:
(a) where an instrument is payable at a fixed period after
date but is issued undated; and
(b) where an instrument is payable at a fixed period after
sight but the acceptance is undated. (ex. Will mature 30
days after acceptance of payee)
(2) Date of issue or acceptance to be specified. — Any holder may
insert therein the true date of issue or acceptance and the
instrument shall be payable accordingly. It is necessary that the date
of issue or acceptance, as the case may be, be specified so as to
determine the date of maturity. Unless the true date is inserted, one
will not know when the instrument will be due.
Effect of insertion of wrong date.
The insertion of a. a wrong date in an undated instrument by one
having knowledge of the true date of issue or acceptance will avoid
the instrument as to him or any one claiming under him but not as to
a subsequent holder in due course who may enforce the same
notwithstanding the improper date. In the hands of a holder in due
course, the date inserted, even if wrong, is to be regarded as
the true date. (Sec. 13.)
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NEGO From the Discussions of Atty. Ramon Edison Batacan

When is it payable to the holder of the office?

Section 8. When payable to order.

The instrument is payable to order where it is drawn payable to

the order of a specified person or to him or his order. It may be
Section 42 of the NIL. Effect of instrument drawn or indorsed to a
drawn payable to the order of:
person as cashier.
(a) A payee who is not maker, drawer, or drawee; or
(b) The drawer or maker; or
“Where an instrument is drawn or indorsed to a person as
(c) The drawee; or
"cashier" or other fiscal officer of a bank or corporation, it is
(d) Two or more payees jointly; or
deemed prima facie to be payable to the bank or corporation of
(e) One or some of several payees; or
which he is such officer, and may be negotiated by either the
(f) the holder of an office for the time being.
indorsement of the bank or corporation or the indorsement of the
officer.”

Thus, when the payee appears to be the officer of a

corporation, it is deemed prima facie payable to the
corporation he represents.

Where the instrument is payable to order, the payee must be

named or otherwise indicated therein with reasonable certainty.
(last paragraph of Section 8)
1. A specified person must always be named in an order
instrument.
2. If there is no payee, there is nobody who could give the
order or authority to collect.
3. BUT, it is sufficient if the payee, though not named, is
described with REASONABLE CERTAINTY. (ex. Payable
to the cashier of Ateneo de Davao University)
a. He can still be identified.

Section 9. When payable to bearer.

The instrument is payable to bearer:

Is there a significant difference between the two as to their
effect?
None. The only difference is that the word “order” comes before or
after the name of a specified person.
1. To the order of a specified person - “Pay to the order of Juan Dela
Cruz"
2. To him or his order - “Pay to Juan Dela Cruz or is order“
(a) When it is expressed to be so payable; or
(b) When it is payable to a person named therein or bearer; or
(c) When it is payable to the order of a fictitious or non-existing
person, and such fact was known to the person making it so
payable; or
(d) When the name of the payee does not purport to be the name
of any person; or
(e) When the only or last indorsement is an indorsement in blank.

TRADERS ROYAL BANK VS. COURT OF APPEALS

Note: It is not essential that the words “to the order of” or “or order”
80 SCAD 12, 269 SCRA 15
be used.
FACTS:
The Central Bank issued "Central Bank Certificate of
Persons to whom order instrument may be drawn. Indebtedness“ (CBCI) wherein it "promises to pay to bearer, or if
(a) A payee who is not maker, drawer, or drawee; or this Certificate of Indebtedness be registered, to Filriters Guaranty
It refers to a third person, who is not a party to the Assurance Corporation, the registered owner hereof."
instrument.
ISSUE: Is such CBCI negotiable?
(b) The drawer or maker; or
This means that the payee is also the maker, or the HELD: No.
drawer. The CBCI indicates that the same is payable to Filriters Guaranty
(c) The drawee; or Assurance Corporation, and to no one else, thus, discounting the
(d) Two or more payees jointly; or submission that the same is negotiable instrument. As worded,
the instrument provides a promise "to pay Filriters Guaranty
“Pay to the order of Juan and Pedro”
Assurance Corporation, the registered owner hereof." Very
(e) One or some of several payees; or clearly, the instrument is payable only to Filriters, the registered
“Pay to the order of Juan and Pedro, or anyone of them” owner, whose name is inscribed thereon. It lacks the words of
(f) The holder of an office for the time being. negotiability which should have served as an expression of

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NEGO From the Discussions of Atty. Ramon Edison Batacan
consent that the instrument may be transferred by negotiation.
Note: The word "bearer" in the instrument was probably
considered by the court as a mere description of Filriters, the
owner of the CBCI, and not to indicate that it is payable to
bearer.
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e the instrument had not been filled up in accordance with the authority
SECTION 14 INCOMPLETE BUT DELIVERED INSTRUMENT
Section 14. Blanks; when may be filled. Where the instrument is
wanting in any material particular, the person in possession
thereof has a prima facie authority to complete it by filling up the
blanks therein. And a signature on a blank paper delivered by the
person making the signature in order that the paper may be
converted into a negotiable instrument operates as a prima facie
authority to fill it up as such for any amount. In order, however,
that any such instrument when completed may be enforced
against any person who became a party thereto prior to its
completion, it must be filled up strictly in accordance with the
authority given and within a reasonable time. But if any such
instrument, after completion, is negotiated to a holder in due
course, it is valid and effectual for all purposes in his hands, and
he may enforce it as if it had been filled up strictly in accordance
with the authority given and within a reasonable time.
This is merely a personal defense and cannot be invoked against a
holder in due course.
1. Incomplete – when the instrument is wanting in any
material particular.
2. When filled-up, the instrument becomes complete
pursuant to Sec. 1
Q: What makes an instrument good
A: Compliance with Section 1 and delivery.
The absence of any one makes the instrument incomplete. It is
essential to complete any contract on a negotiable instrument that
the same be delivered.
Delivery is necessary not only to the original contract, but to an
INDORSEMENT or ACCEPTANCE. No rights, properly speaking,
can arise with respect to an instrument until it is delivered.
Requisites of effectual delivery:
1. made by or under the AUTHORITY of the maker, drawer,
acceptor or indorser as the case may be;
2. for the PURPOSE of transferring the property in the
instrument; there must be acceptance.
Examples:
1. Date is not indicated
a. It is important to identify the maturity date
2. Amount is left in blank
a. It is important to note the amount
3. Name of the payee or name of the endorsee is left in blank
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NOTE: Incomplete instrument does not alter the negotiable character
of the instrument. It merely gives rise to defenses.
When the holder gets the blank instrument - prima facie that the
holder must fill it up in accordance with the authority given.
What if he antedated the instrument - it will not void the instrument.
(From De Leon: Right of holder in due course. — The defense that
given and within a reasonable time is not available as against a
holder in due course.)
SECTION 15 INCOMPLETE AND UNDELIVERED INSTRUMENT
Section 15. Incomplete Instrument not delivered. Where an
incomplete instrument has not been delivered, it will not, if
completed and negotiated without authority, be a valid contract in
the hands of any holder as against any person whose signature
was placed thereon before delivery.
Real defense and it is attached to the instrument itself
Example:
1. PN is drawn with payee in blank ( it is incomplete, signed
by the maker, the maker places the PN inside his vault)
a. What if the PN is stolen and negotiated until it
reaches the hands of the holder in due course,
is the maker liable?
i. It can be invoked as defense.
b. How about the endorsers? IF P stole the PN and
placed his name, then endorses it to another
person until it reaches the hands of the holder in
due course? Who are liable on the PN?
i. It is a real defense as against a holder
in due course. In the hands of the
maker, the instrument cannot be
enforced.
ii. Endorsers are liable against the
holder in due course and cannot use
the defense in Section 15.
Effects:
Before delivery - the instrument is INVALID in the hands of ANY
HOLDER as against any person whose signature was placed before
delivery;
After delivery - the instrument is VALID in the hands a HOLDER
DUE COURSE as against any person whose signature was placed
after delivery
Rules where instrument incomplete and undelivered
(DE LEON)
(1) Defense even against a holder in due course. — The fact that an
incomplete instrument, completed without authority, has not been
delivered, is a defense even against a holder in due course.
NEGO From the Discussions of Atty. Ramon Edison Batacan
(2) Defense available to parties prior to delivery.—The invalidity of
the above instrument is only with reference to the parties whose
signatures appear on the instrument before and not after delivery.
SECTION 16 COMPLETE BUT UNDELIVERED INSTRUMENT
Section 16. Delivery; when effectual; when presumed. Every
contract on a negotiable instrument is incomplete and revocable
until delivery of the instrument for the purpose of giving effect
thereto. As between immediate parties and as regards a remote
party other than a holder in due course, the delivery, in order to be
effectual, must be made either by or under the authority of the
party making, drawing, accepting, or indorsing, as the case may
be; and, in such case, the delivery may be shown to have been
conditional, or for a special purpose only, and not for the purpose
of transferring the property in the instrument.
But where the instrument is in the hands of a holder in due
course, a valid delivery thereof by all parties prior to him so as to
make them liable to him is conclusively presumed. And where the
instrument is no longer in the possession of a party whose
signature appears thereon, a valid and intentional delivery by him
is presumed until the contrary is proved.
RULES WHERE INSTRUMENT IS MECHANICALLY COMPLETE
1. Undelivered
Every contract on negotiable instrument even if it is completely
written is incomplete and revocable until its delivery for the purpose
of giving it effect.
2. In Possession of Party other than a holder in due course
If a complete instrument is found in the possession of an immediate
party or a remote party other than a holder in due course, there is a
prima facie presumption of delivery but subject to rebuttal.
An undelivered instrument is inoperative because delivery is a
prerequisite to liability. However, if the instrument is no longer in the
possession of the person who signed it and it is complete by its
terms, “a valid and intentional delivery by him is presumed until the
contrary is proved.” (Sec. 16, last sentence.)
3. Delivered conditionally or for a special purpose
If delivery was made or authorized, it may be shown to have been
conditional, or for a special purpose or transferring the property(title)
to the instrument.
When delivery is made , it is presumed to be made with the intention
to transfer ownership of the instrument to the payee.
4. In the hands of a holder in due course
If a complete instrument is in the hands of a holder in due course, a
valid delivery thereof by all parties prior to him is conclusively
presumed.
A presumption is said to be conclusive when admission of evidence
to the contrary is not allowed.
4
NOTE:
The delivery of the instrument is the final act essential to its
consummation as an obligation. An undelivered instrument is
inoperative. Until delivery, the contract is revocable. And the
issuance as well as the delivery of the check must be to a person
who takes it as a holder, which means the payee or indorsee of a
bill or note, who is in possession of it, or the bearer thereof.
Delivery of the check signifies transfer of possession, whether
actual or constructive, from one person to another with intent to
transfer title thereto
(PP VS YABUT, SEE: DBP VS SIMA WEI, 3-09-93, 219 SCRA
736)
What does delivery mean in the case of DBP v Sima Wei?
Receipt of the instrument by the transferee who takes it as a holder
thereof. Like the payee or endorsee or the bearer of the instrument.
LIM VS CA
FACTS:
Lim spouses issued several checks to pay LINTON for the
delivery of construction materials. LINTON, which has its place of
business in Navotas, sent a collector who received the checks
from Lim spouses at their place of business in Kalookan City.
When the checks were dishonored, the spouses were charged
and convicted of Estafa and BP 22 by RTC of Malabon. They
contended that since the checks were issued, delivered, and
dishonored in Kalookan City, the court exceeded its jurisdiction.
ISSUE:
Where were the checks issued and delivered?
RULING:
Although LINTON sent a collector who received the checks from
the spouses at their place of business in Kalookan City, they were
actually issued and delivered to LINTON at its place of business
in Navotas. The receipt of the checks by the collector of LINTON
is not the issuance and delivery to the payee in contemplation of
law. The collector was not the person who could take the checks
as a holder, i.e. as payee or indorsee thereof, with the intent to
transfer title thereto. Neither could the collector be deemed an
agent of LINTON with respect to the checks because he was a
mere employee.
DE LA VICTORIA VS. BURGOS (245 SCRA 374)
FACTS
A notice of garnishment was served on the City Fiscal of
Mandaue, directing said Fiscal not to disburse, transfer, release,
or convey to any person except to the deputy sheriff concerned
the salary or other checks belonging to Assistant City Fiscal
Mabanto. As a government official, Fiscal Mabanto received
compensation by check from the Department of Justice through
the City Fiscal.
NEGO From the Discussions of Atty. Ramon Edison Batacan

ISSUE:
May the proceeds of a check still in the hands of the drawer be
garnished?

RULING:
Under Section 16 of the Negotiable Instruments Law, every
contract on a negotiable instrument is incomplete and revocable
until delivery of the instrument for the purpose of giving effect
thereto. Inasmuch as the checks had not yet been delivered to
Mabanto, they did not belong to him and still had the character of
public funds. The salary of a government officer or employee does
not belong to him before it is physically delivered to him.
Until that time the check belongs to the government. Accordingly,
before the actual delivery of the check, the payee has no power
over it; he cannot assign it without the consent of the
Government.

From the Full Text of the Case:

Where checks due a government employee have not yet been

delivered to him, they do not belong to him and still have the
character of public funds.—According to the trial court, the checks
of Mabanto, Jr., were already released by the Department of Justice
duly signed by the officer concerned through petitioner and upon
service of the writ of garnishment by the sheriff petitioner was under
obligation to hold them for the judgment creditor. It recognized the
role of petitioner as custodian of the checks. At the same time
however it considered the checks as no longer government funds
and presumed delivered to the payee based on the last sentence of
Sec. 16 of the Negotiable Instruments Law which states: “And where
the instrument is no longer in the possession of a party whose
signature appears thereon, a valid and intentional delivery by him is
presumed.” Yet, the presumption is not conclusive because the last
portion of the provision says “until the contrary is proved.” However
this phrase was deleted by the trial court for no apparent reason.
Proof to the contrary is its own finding that the checks were in the
custody of petitioner. Inasmuch as said checks had not yet been
delivered to Mabanto, Jr., they did not belong to him and still had the
character of public funds. In Tiro v. Hontanosas we ruled that—The
salary check of a government officer or employee such as a teacher
does not belong to him before it is physically delivered to him. Until
that time the check belongs to the government. Accordingly, before
there is actual delivery of the check, the payee has no power over it;
he cannot assign it without the consent of the Government.

Checks due a government employee may not be garnished to

satisfy a judgment.—As a necessary consequence of being public
fund, the checks may not be garnished to satisfy the judgment. The
rationale behind this doctrine is obvious consideration of public
policy. The Court succinctly stated in Commissioner of Public
Highways v. San Diego that—The functions and public services
rendered by the State cannot be allowed to be paralyzed or
disrupted by the diversion of public funds from their legitimate and
specific objects, as appropriated by law.