NEGO (September 1, 2020)

1. Velasco (2i)
GSIS vs. Court of Appeals – parties specific Mr. & Mrs. Isabelo Racho and Mr. & Mrs. Flaviano
Lagasca

How many documents did they sign? Deed of Mortgage, Assumption of Mortgage, Promissory
Note

Who signed the Promissory Note? Both spouses

Accommodation Parties – are we referring to the principal debtor? The one who really
borrowed? Persons who signed the Promissory Note who are not debtors but alleged that they
are. OR one who signed the instrument as maker, drawer, indorser, or acceptor, without
having receiving value thereof for the purpose of lending his name to some other person.

Were they Accommodation Parties? No.

Applicable rule? The Negotiogable Instruments Law strictly applies to negotiable instruments.
It does not apply to non negotiables.

Rule: Determine whether the instrument is negotiable on the basis of Section 1 of the NIL.
Apply the rule: According to Section 1, 4th requisite – must be payable to order or to bearer. In
this case, it was payable to a specific person.

Therefore, the NIL does not apply including the provision on accommodation parties in
relation to this case.

- Memorize Section 1. Definition of promissory note, bill of exchange, checks, negotiation

First step: Check if the instrument is negotiable before you can apply the NIL.

Functions of Negotiable Instruments

1. Substitute for money
2. Medium of exchange
3. Credit instrument
4. Purchasing power
5. Proof of transaction

2. Galang (2J)
Federal Express vs. Antoninos
ISSUE: packages include the checks and were not delivered

What is an Airway Bill? Bill of Trading transportation for air OR It serves as a receipt of goods
by an airline, as well as a contract of carriage between the shipper and the carrier.

ARGUMENT: FEDEX is invoking that they should not have done that. They cannot send money or
nego instruments equivalent to cash
Did the Antoninos violate the provision disallowing them to send money? No they did not
because a check is not a money and has no legal tender. It is only a substitute of money.

What is money? Coins or notes used as a form of payment for goods, services, and debts.
Is legal tender money? Yes. Legal Tender
Is there anything that you can consider money but not legal tender? Yes. Under Circular No. 537
Series of 2006 issued by the Bangko Sentral ng Pilipinas (BSP), payment, particularly in the
form of coins, shall be “legal tender” or must be accepted for as long as it does not exceed a
certain limit.

For P1 to P5 denominations, they must not exceed P1,000 while 1, 5, 10 or 25 cents must not
exceed P100 in total.
They are medium of exchange? But they are not legal tender? Yes.

RULE: Checks are not money. They are just substitute for money.

Are all negotiable instruments prohibited? No. Only negotiable instruments equivalent to cash.

2nd ISSUE: Will you consider the checks negotiable instruments equivalent to cash? No. (Di ko
alam pano i-expound yung sagot)
RULE: Payable to a specific person. Not negotiable instruments.

What about managers check?

Managers checks are as good as cash? No? Yes? (Di ko sure)
What is cash? Cash means payment of money.
Why did the SC ruled that managers checks as good as cash? Because you can issue a Stop
Order. Once it is issued, it is deemed __________
When you deliver a managers check, you are deemed paid? NO. The Civil Code provides that
“The delivery of promissory notes payable to order, or bills of exchange or other mercantile
documents shall produce the effect of payment only when they have been cashed, or when
through the fault of the creditor they have been impaired.” (DI KO SURE IF TAMA LEGAL BASIS
)

Parties in a managers check vs ordinary check

Ordinary check – who are the parties: drawee (always a bank), drawer, payee
Manager’s check - ????
What is necessary for you to draw a check? You must have an account.
What account? Checking account/Current account/Demand Deposit

Managers check –
Do you need a checking account? No
What is the difference with an ordinary check? Managers check the drawer and the drawee are
the same. (Di ko sure kung tama to)
Managers check are not as good as cash because they are not legal tender and money. Mere
delivery does not also amount to payment.
Is a certified check the same to managers check? Difference between a managers check and a
certified check? Like a certified check, a cashier’s check offers a guarantee to the payee that
there is enough money to cover the amount of the check. The difference between the two is
that a cashier’s check draws on the bank’s funds, rather than an individual account holder’s
funds.

Why managers checks are considered good as cash?

Difference between managers check and ordinary check? Parties? Drawer and drawee the same
person.
What makes it as good as cash?
How do you get a managers check? You buy? Whether it is a personal check or a managers
check where the amount is paid by the purchaser. In both cases, it is both the money of the
bank. Why? Because the contract involved in a bank deposit is a contract of loan. Whether you
are depositing in your checking account, savings account, you are in a contract of loan. It’s
basically a loan. Payable on demand. The owner of the amount is the bank.
If the drawer and drawee is the same person, it can be treated as notes.

Classification of Negotiable Instruments

Bill of Exchange
Promissory Note

A check is a bill of exchange drawn from the bank payable on demand.

Managers check drawer and drawee is the same person. If you’re the holder, you can treat it as
promissory note. Under Sec 130, the bill of exchange can be treated as promissory note. It is as
if a promissory note by the bank. The bank will now be primarily liable. The drawee itself will not
be liable but being a maker is primarily liable.

Unlike other bill of exchange, when a bank issues a managers check, like a certified check, it is
accepted by the mere issuance.
Pag acceptance ano effect sa parties? There will be a change in the drawee to acceptor. The
acceptor is the one primarily liable in the instrument. The drawee is not yet liable.

If the check is dishonored, you cant sue the drawee bank unless it is a managers check. You have
no cause of action to the drawee bank. Whereas if the check is already accepted, the drawee is
now the acceptor the bank. Now, you can sue the drawee bank.
 BUT THEY ARE STILL NOT CASH AND MONEY. Delivery of managers check will not amount to
payment. The SC in its ruling: you can even stop the payment of a managers check. If the holder
is not the holder, ________.

We said that this is one exception that a bill of exchange can be treated as promissory note.
- Drawee is a fictitious person.
- Drawee does not have the capacity to contract.

Definition of bill of exchange, check, concept, stages of the life,

Give an example of a promissory note or a bill of exchange.

Negotiable intruements vs non nego, negotiable instruments vs credit

Code of commerce of negotiable

Preparation of sample promissory notes and bill of exchange – it should be negotiable

Submit thru google document then convert to pdf

Chapter 1 + 2 + 3 requisites of negotiability and ____

Additional assignment: submission before the next meeting. Might post in google classroom.

Submit thru google classroom before 1 pm.

Discuss problems next meeting.

NIL or Civil Code or code of commerce on non nego credit

Wait for the hw, if not tonight tomorrow.