Almanoche, Marc Anthony L

Negotiable Instruments Law - Sections 14 to 16

Q1: Flynn was about to leave for a business trip. As his usual practice, he signed several
blank checks. He instructed Mulan, his secretary, to fill them as payment for his
obligations. This is part of Mulan’s usual task. However this time, Mulan filled one check
with her name as payee, placed P55, 000.00 thereon, endorsed and delivered it to Tiana.
Tiana accepted the check in good faith as payment for goods she delivered to Mulan. She
has no knowledge as to what Mulan did. Eventually, Mulan regretted what she did and
apologized to Flynn. Immediately he directed the drawee bank to dishonor the check.
When Tiana encashed the check it was dishonored.

a. Is Flynn liable to Tiana? Explain.  

Yes. Jun is liable to Marie because she is a holder in due course. Section 14 of the NIL, in order
that an incomplete 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. However, 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 in accordance with the authority given and within a reasonable time. Marie
accepted the check in good faith and for value therefore, she is a holder in due course, who has
the right to ask for payment of the check for the full amount against Jun.

b. Supposing the check was stolen while in Mulan's possession and a thief filled the blank
check, endorsed and delivered it to Tiana in payment for the goods he purchased from her,
is Flynn liable to Tiana if the check is dishonored? Explain.

No. Section 15 of the NIL 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.
The check was stolen therefore Flynn is not liable to Tiana .

Q2: Hayden made a complete promissory note for P12, 500.00, payable to the order of his
cousin, Vicky. He signed it but mindlessly left the note on top of his desk at the end of the
workday. When he returned the following morning, the note was missing. It turned out
that Vicky stole the note from Hayden’s office and endorsed the same to Scarlet. When
presented to him, Hayden dishonored the note, contending that he did not authorize its
delivery. But Scarlet said she had no participation in, or knowledge about the pilferage of
the note and therefore she enjoys the rights of a holder in due course under the Negotiable
Instruments Law. May Scarlet collect from Hayden? Why or why not? 

PN is correct,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. Vicky took the note and delivered
without PN’s authority therefore it is not valid.