A:

NM cannot invoke the defense of absence of consideration against

SIH. There is no showing that SIH is not a holder in due course,
side hence, the presumption on due course holding stands. As a holder
in due course, SIH is free from personal defenses of prior parties
(1993 Bar).
2.
A:
A bill of exchange was issued because of the love and affection of
the drawer for the payee. Can the drawer be held secondarily liable
(assuming non-acceptance by the drawee) on the instrument: (a) by
the payee; (b) by a holder in due course?
a)
No. The drawer cannot be held secondarily liable by the
payee because while the love and affection may be a good
consideration, it is not a valuable consideration. Want or
absence of consideration is a valid defense between a drawer
and a payee.
b)
Yes. A holder in due course can hold the drawer secondarily
liable. Want or absence of consideration is only a personal
defense and cannot be raised against a holder in due course
(Sec. 28, NIL).
3.
Pedro issued a negotiable note to Juan, a government employee,
to facilitate the early release of the government approval of the
application that he filed. Juan negotiated the instrument to Pablo,
a holder in due course. When Pablo presented the instrument to
Pedro for payment, Pedro claims that he is not liable because the
consideration was illicit. Is the refusal of Pedro justified?
A:
The refusal is not justified. Illegality of consideration is only a
personal defense. Since Pablo is a holder in due course, the illegality
of the consideration cannot be invoked?
13.08. MINORITY OR INCAPACITY, OR WANT OF
AUTHORITY
a)
Minority
or
incapacity (i.e., insanity) may
be invoked by the minor or incapacitated as
real defense. However, other parties who are
capacitated cannot invoke such defense. The
defense is personal to the minor or incapacitated
only (1989 Bar). Transfer of title by the minor is
however effective negotiation.
b)
The fact that indorsement or issuance of an
instrument as an ultra vires act of a corporation is
a real defense.