NEGOTIABLE INSTRUMENTS

FINAL EXAMINATIONS

1. A made a negotiable promissory note for P1,000.00 payable to the order of B. B negotiated the note to C and
C to D. D, then altered the note to read P10,000.00 with the consent of B, then indorsed it as follows:
Pay to E Sgd. D
Pay to F Sgd. E
a) Can F be still a holder in due course despite such alteration? Explain.
b) If F, presents for payment to A, how much shall A be liable? Explain.

2. X issued a promissory note incomplete as to amount to and authorized P to fill in the blank up to P1,000.00.
However, P filled it up with the amount of P10,000.00. Then, P negotiated the note, as completed, to Y.
a) Can Y enforce the note as completed against X? Explain.
b) If Y cannot collect from X, may he (Y) collect the amount to P? Reasons.

3. Tito issues a negotiable bill of exchange for the amount of P50,000 payable to Vic or bearer. Vic then nego-
tiates it by delivery to Joey, Joey then negotiates it by delivery to Val, and Val negotiates it to Jimmy by special
indorsement. Jimmy in turn negotiates the instrument to Spanky also by special indorsement, and Spanky in
turn negotiates the instrument to Freeda Fonda by blank indorsement. May Freeda Fonda strike out all the in-
dorsements? Why?

4. Mr. Ang issues a negotiable promissory note for P10,000 to Mr. Soriano. Mr. Soriano negotiates the note to
Mr. Rodriguez. Mr. Rodriguez negotiates it to Mr. Lagmay. Mr. Lagmay negotiates it to Kuya Jeff and Kuya
Jeff negotiates it to Kuya Dino. Can Kuya Dino negotiate the note back to Mr. Ang? Why?

5. a) Enumerate the five (5) methods for discharge of an instrument under the law.
b) What constitutes material alteration of an instrument?

6. The signature of A is forged on a negotiable note made payable to B or order. Indorsements are from B to C;
C to D. At maturity, D presents for payment and A refuses on the ground of forgery.
a) Is A liable on the note to D? Explain.
b) Will C be liable to D, in the event A does not pay? Explain.
c) Suppose that the note had really been signed by A, but it was the indorsement of B that had been
forged, would D be entitled to payment from A? Reasons.
d) Would D be entitled to payment from C? Explain.

7. X issued a promissory note payable to the order of Y who negotiated the instrument to A. Unknown
to A, the note was stolen by B, his trusted housekeeper. B forged the signature of A and negotiated the
note to C. Later, C indorsed and delivered the note to D, a holder in due course. Discuss the liabilities
of X, Y, A, B and C to D.

8. X issued a promissory note payable to the order of A. Upon receipt of the instrument, A indorsed it in blank
and delivered it to B.
a) How should B negotiate the note?
b) Suppose B negotiated the note to C, what is the effect on the instrument if C subsequently nego-
tiated it to D through special indorsement and delivery?

9. On September 15, 1980, N issued to X or order a negotiable instrument payable on October 7, 1980. There-
after or on October 9, 1980, X negotiated the instrument to H who received it in good faith.
Question: Is H considered a holder in due course? Reasons.

10. Juan makes a negotiable promissory note payable to his own order, signing Pedro's name thereon as maker
without Pedro's knowledge and consent. Juan then indorses the note to Jose who, in turn, indorses it to Carlos
under circumstances which make Carlos a holder in due course. May Carlos enforce the note against Pedro?
And if the note is dishonored by Pedro, may Carlos hold Juan and Jose liable on their respective indorsements?
Reason out your answers.