NEGO Q&As (Sky Notes)

NEGOTIABLE
INSTRUMENTS:
SAMPLE QUESTIONS
BASED ON TIMOTEO AQUINO’S NEGOTIABLE INSTRUMENTS LAW
PREPARED BY: SAMANTHA MAKAYAN

NEGOTIABLE INSTRUMENTS:
SAMPLE QUESTIONS
Table of Contents
GENERAL CONSIDERATIONS ..................................................... 2
NEGOTIABILITY ............................................................................ 2
HOW NEGOTIABILITY IS DETERMINED .................................... 2
EFFECT OF ESTOPPEL ....................................................................... 2
THE REQUISITES OF NEGOTIABILITY ........................................ 2
It must be in Writing Signed by the Maker or Drawer ...... 2
It must contain an unconditional promise or order to pay
a sum certain in money ................................................................... 3
Payable to Order or Bearer ............................................................ 4
OMISSIONS AND PROVISIONS THAT DO NOTE AFFECT
NEGOTIABILITY ................................................................................... 4
Omissions ............................................................................................... 4
Additional Provisions ........................................................................ 4
INTERPRETATION OF INSTRUMENTS ................................... 5
TRANSFER AND NEGOTIATION ............................................... 5
HOW NEGOTIATION TAKES PLACE ............................................. 5
HOLDERS ......................................................................................... 5
HOLDERS IN DUE COURSE ............................................................... 5
SHELTER RULE ..................................................................................... 6
PARTIES WHO ARE LIABLE ....................................................... 7
ACCEPTOR .............................................................................................. 7
INDORSERS OF BEARER INSTRUMENTS ................................... 7
ACCOMODATION PARTIES .............................................................. 9
DEFENSES ...................................................................................... 10
MINORITY ............................................................................................. 10
NON-DELIVERY AND CONDITIONAL DELIVERY .................. 10
FILLING UP BLANKS BEYOND AUTHORITY ........................... 11
FRAUD .................................................................................................... 12
MATERIAL ALTERATION ............................................................... 12
ABSENCE OR FAILURE OF CONSIDERTAION ......................... 12
FORGERY AND WANT OF AUTHORITY ..................................... 13
Forgery in Notes ............................................................................... 13
Forgery in Bills of Exchange ........................................................ 14
ENFORCEMENT OF LIABILITY ................................................ 16
PRESENTMENT FOR PAYMENT .................................................. 16
Retention of Liability Even if Not Presented ........................ 16
NOTICE OF DISHONOR .................................................................... 17
Waiver of Notice ............................................................................... 17
Notice is Excused or Unnecessary ............................................. 17
CHECKS .......................................................................................... 18
CASHIER’S AND MANAGER’S CHECKS ...................................... 18
RELATIONSHIP BETWEEN PAYEE, DRAWEE, AND
DRAWER ................................................................................................ 18

1

SAMPLE QUESTIONS
the 21st day of each month starting 21 March 1980
GENERAL CONSIDERATIONS
through and inclusive of 21 February 1983

(d) It is payable to Violago Motor Sales Corporations, or
QUESTION: Negotiable instruments are used as substitutes
order and as such
for money, which means –

ANSWER: When negotiated, negotiable instruments can be
used to pay indebtedness. It is a medium of exchange. It is a EFFECT OF ESTOPPEL
credit instrument that increases credit circulation. It
increases purchasing power in circulation and is a proof of Question: If an instrument does not contain all the requisites
transaction. of negotiability specified in Sec. 1, NIL, can the instrument
still be considered negotiable as between the parties on the

basis of estoppel?
NEGOTIABILITY
Answer: Yes.

HOW NEGOTIABILITY IS DETERMINED
THE REQUISITES OF NEGOTIABILITY

It must be in Writing Signed by the Maker or Drawer

QUESTION #1: Juan Cruz borrowed P1,000 from Pedro
Santos as evidenced by a PN executed by X as maker. All other
requisites of negotiability are present in the note except that
Juan Cruz did not affix his usual signature thereon. As Juan
was ailing at that time, he was only able to put X in the blank
space meant for the signature of the maker. Is the requisite
that the instrument must be signed by the maker complied
with?
Answer: YES. The letter X is sufficient to comply with the
requirement that the instrument must be signed by the
maker. It appears from the problem that such letter was
adopted by Juan Cruz with the intent to authenticate the
instrument. It is not necessary that the signature is the usual
signature of the maker.

QUESTION #2: A PN states as follows: I, Cecilia W. Donohue
after date 10 August 2002 promises to pay to the order of
Richard Donohue thirteen thousand and seventy pesos for value
received with interest at 6% per annum. The note was on a
printed form, and the words underscored above were in the
handwriting of Mrs. Donohue. No signature appears at any
other place on the note. Is the note signed by the maker?
ANSWER: YES. The fact that Mrs. Donohue’s signature
appears in the body of the note and not at the end is
unimportant, so long as she intended thereby to obligate
herself for its payment. It is not necessary in a NI that the

signature of the maker or the drawer should at the end
ANSWER: The instrument is negotiable, having complied
contract, or at the top or the right or left hand, with the
with the requisites under Sec 1, NIL as follows:
intention to sign or for the purpose of authenticating the
(a) It is in writing and signed by the maker Juanito Salas
instrument, it is sufficient to bind him.
(b) It contains an unconditional promise to pay the amount

of P58,138.20

(c) It is payable at a fixed or determinable future time which

is P1,614.95 monthly for 36 months due and payable on

2

SAMPLE QUESTIONS
It must contain an unconditional promise or order to ANSWER: THE BOOKSTORE’S CONTENTION IS
pay a sum certain in money
UNTENABLE. Postal money orders are under the restrictions

and limitations of the postal laws. Hence, they do not contain
QUESTION: Is a PN wherein the maker promises to pay “as
an unconditional promise or order required by Secs. 1 and 3,
soon as his means permit him to do so” negotiable?
NIL.
ANSWER: NO. The phrase “as soon as his means permit him

to do so” renders the promise conditional, although under the
QUESTION #4: State if the following documents/instruments
Civil Code, it could be considered as an obligation with a
are negotiable:
period.
a) Letters of Credit

b) Certificate of Stock
QUESTION #1: Is a postal money order negotiable?
c) Bill of Lading
ANSWER: NO. It does not contain an unconditional promise
d) Warehouse Receipt
or order to pay required in Sec. 1(b), NIL. Regulations or
e) Aval
restrictions are imposed on postal money orders which are
ANSWER:
inconsistent with the character of negotiable instruments.
a) Letters of Credit are not negotiable because they do
The rules and regulations on postal money orders usually
not contain an unconditional promise or order to pay. A
provide for not more than one indorsement. They also
letter of credit is a written instrument whereby a person
provide that payment may be withheld under a variety of
(ex. buyer) requests another (bank) and the latter agrees
circumstances.
to advance money or give credit to a 3rd person (ex.

seller) and promises to repay the person making the
QUESTION #2: A treasury warrant was issued by Mr. PA in
advancement. Payment or advancement made by the
his capacity as disbursing officer of the Food Administration,
entity (bank) requested to pay should be made only if
a government instrumentality. The warrant states that it is
the 3rd (seller) presents certain documents. In addition,
“payable for additional cash advances for the Food Program
a letter of credit under the Code of Commerce is
Campaign in La Union” and the amount stated therein is
addressed to a specified persons.
payable from the appropriation for food administration.” The
b) A certificate of stock is not negotiable because there
warrant is now in the hands of Mr. BA who claims to be a
is no promise or order to pay. It is written evidence of
holder in due course. Can BA be considered a holder in due
shareholding of a person in a corporation, hence, it does
course of a negotiable instrument?
not represent an obligation to pay a sum certain in
ANSWER: NO, because BA is not even a holder of the warrant.
money. However, such certificates are also considered
He cannot be a holder because the warrant is not negotiable.
as quasi-negotiable because they can be transferred
The promise to pay is conditional because the sum is payable
through indorsement.
out of a particular fund which is the appropriation for food
c) A bill of lading is not a negotiable instrument. It
administration.
represents goods rather than money. A bill of lading is a

form of document of title issued by the carrier whereby
QUESTION #3: A bookstore received five postal money
receipt of goods is acknowledge and the carrier
orders totaling P1,000.00 as part of sales receipts, and
promises to deliver the goods to whoever is validly
deposited the same with a bank. A day after, the bank tried to
holding it and who can present the bill of lading. It may
clear them with the Bureau of Posts. It turned out, however,
be considered a negotiable document of title under the
that the postal money orders were irregularly issued thereby
Civil Code, but it is not a NI under the NIL.
prompting the Bureau of posts to serve notice upon all banks
d) A warehouse receipt is not a negotiable instrument
not to pay orders if presented for payment. The Bureau of
because it is also a document of title that represents title
posts further informed the bank that the amount of P1,000.00
to and possession of goods. It is a document issued by a
had been deducted from the bank’s clearing account for the
warehouseman acknowledging receipt of goods that
same amount. A complaint was filed by the bookstore against
were deposited by another promising to deliver to
the Bureau of Posts and the bank for the recovery of the sum
whoever is validly holding it and who can present the
of P1,000.00 which however, was dismissed by the trial court.
same. Like a bill of lading, it may be negotiable under the
The bookstore appeals contending that postal money orders
Civil Code, but it is not a NI under the NIL because it
are negotiable instruments and that their nature could not
represents goods rather than a promise or order to pay
have been affected by the notice sent by the Bureau of Posts
money.
to the banks. How would you resolve the controversy?

3

SAMPLE QUESTIONS
e) An aval is not a negotiable instrument. An aval OMISSIONS AND PROVISIONS THAT DO NOTE AFFECT
contemplated under Arts. 486 and 487 of the Code of NEGOTIABILITY
Commerce is a guarantee for the payment of drafts that
were already accepted by the drawee. Art. 486 provides Omissions

that the payment of drafts may be secured by an
QUESTION #1: What is the effect if the instrument
obligation independent of that contracted by the
a) Is not dated; or
acceptor or indorser known as an aval Under 487, if the
b) It does not state the place where it is made or
aval is drawn up in general terms and without
payable?
restrictions, the person giving it shall be liable for the
ANSWER:
payment of the draft in the same case and manner as the
a) The negotiability of an instrument is not adversely
person for whom he appears as guarantor.
affected by its being undated (Sec. 6[a]). Even if it is

needed to determine the maturity of the instrument, the
Payable to Order or Bearer
holder is implicitly authorized to place the date thereof
QUESTION #1: Determine if the following instrument is (Sec. 13, NIL) or to consider it dated as of its issue (Sec.
negotiable: FOR VALUE RECEIVED, I/we jointly and severally 17, NIL).
promise to pay to the ITM Corp., the sum of ONE MILLION b) The negotiability of an instrument is not affected if it
NINETY THREE THOUSAND SEVEN HUNDRED EIGHTY-NINE does not state the place where it is made or where it
PESOS & 71/100 only (P1,093,789.71), Philippine Currency, the is payable. All that is required under the NIL is
said principal sum, to be payable in 24 monthly installments compliance with Sec. 1, NIL.
starting 15 July 1978 and every 15th month thereafter until
fully paid… QUESTION #2: Can a BOE or a PN qualify as a NI if

ANSWER: The note is not negotiable because it is not a) It is not dated; or
payable to order or bearer. It is payable to a specified person. b) The day and the month, but not the year of its
maturity, is give; or
QUESTION #2: A PN reads as follows: I promise to pay c) It is payable to cash; or
Gabriela Silangan P100 three years after the unconditional d) It names 2 alternative drawees. (Bar 1997)
withdrawal of the US of its military bases in the Philippines. ANSWER:
Discuss the negotiability or non-negotiability of the note. a) YES. Sec. 6(a) provides that the negotiability of an
Discuss the effect of each of the following upon the note’s instrument is not affected if it is not dated. The date of
negotiability: no date is given the place where drawn and issuance is not a requisite of negotiability prescribed by
where payable are not stated. (Bar 1988) Sec. 1, NIL
ANSWER: The PN is not a NI. The instrument is not payable b) NO. Absence of the year of maturity affects the
to order or to bearer as required in Sec. 1(d), NIL. It should be negotiability. The evident intent is to make the
noted that the phrase “unconditional withdrawal of its instrument payable on a fixed date but the year was
military bases in the Philippines” does not destroy the omitted. Hence, the time for payment is not
unconditional nature of the promise to pay since the presence determinable in this case.
in the country of the bases is merely temporary and that their c) YES. Under Sec. 9(d), NIL, an instrument is payable to
ultimate removal from the Philippines is just a matter of time. bearer if the name of the payee does not purport to be
the name of any person. The name of a payee (cash) is an

QUESTION #3: X bought a jeep from Reliable Motors inanimate object, hence, it is a bearer instrument.
Company for a consideration of P50,000. He paid P25,000 in d) NO. Sec. 128, NIL provides a bill may not be addressed to
cash and executed the following PN on the balance: September 2 or more drawees in the alternative or in succession.
1, 1989; I promise to pay the sum of P25,000 to Reliable Motors Otherwise, there is not certainty as to the person to
Company on or before December 1, 1989; (Sgd.) X; Is the PN a whom the instrument may be presented for payment.
NI? (Bar 1989)
ANSWER: The PN is not negotiable because it is neither Additional Provisions

payable to order nor to bearer. The instrument is payable to
QUESTION: The manager and treasurer of MORB Company
Reliable Motors, Inc. merely and not to “order or bearer” or
executed and delivered to PNB a PN whereby the company
words of similar import.
promises to pay to the rider of PNB the amount of P61,000.

The note contains the following stipulations: “Without

4

SAMPLE QUESTIONS
defalcation, value received; and do hereby authorize any
TRANSFER AND NEGOTIATION
attorney in the Philippines, in case this note be not paid at

maturity, to appear in the name and confess judgement for
HOW NEGOTIATION TAKES PLACE
the above sum with interest, cost of suit and attorney’s fees of

10% for collection, a release of all errors and waiver of all
QUESTION #1: X makes a note payable to bearer, and
rights to inquisition and appeal, and to the benefit of all laws
delivers the same to Y. Y indorses it to Z in this manner: Pay
exempting property, real or personal, from levy or sale.”
to Z, sgd. Y. Later Z without indorsing the PN transfers and
MORB claims that the instrument is not negotiable because
delivers the same to R. The note is subsequently dishonored
the above stipulations are invalid. Is MORB correct?
by X. May R hold X liable? (Bar 1975)
ANSWER: The negotiability of the instrument is not
ANSWER: Yes R may hold X liable. The instrument is a
affected by the stipulations. It is still negotiable if all other
bearer instrument, hence, the special indorsement did not
requirements of Sec. 1 are present. MORB is correct in
convert the instrument into an order instrument. Sec. 40, NIL
stipulating that the stipulations are void. They are in the
provides that where the instrument, payable to bearer, is
nature of stipulations authorizing confession of judgment
indorsed specially, it may nevertheless be further negotiated
which is considered void for being against public policy in this
by delivery. Hence, delivery constitutes negotiation of the
jurisdiction. However, Sec. 5, NIL provides that the
instrument to R and he became a holder of the instrument.
negotiable character of an instrument otherwise

negotiable is not affected by a provision which authorizes
QUESTION #2: Richard Clinton makes a PN payable to bearer
confession of judgment if the instrument be not paid at
and delivers the same to Aurora Page. Aurora Page, however,
maturity. In other words, only the stipulation is avoided.
indorsers it to X in this manner: Payable to X. Sgd: Aurora

Page. Later, without indorsing the PN, X transfers and
INTERPRETATION OF INSTRUMENTS delivers the same to Napoleon. Richard Clinton subsequently
dishonors the note. May Napoleon proceed against Richard
QUESTION #1: How do you treat a NI that is so ambiguous Clinton for the note? (Bar 1998)
that there is doubt as to whether it is a bill or a note? (Bar ANSWER: YES, Napoleon may proceed against Richard
1998) Clinton. The instrument was negotiated by delivery to
ANSWER: The holder may treat it either as a BOE or a PN at Napoleon. Despite the special indorsement of Ms. Page it can
his election. still be negotiated by delivery because it is originally a bearer
instrument (Sec. 40, NIL). Hence, Napoleon became a holder
QUESTION #2: X, Y, Z signed a PN in favor of A stating We who has the right to enforce the instrument against the
promise to pay A on December 31, 2001 the sum of P5,000. maker, Richard Clinton.
When the note fell due, A sued X and Y who put up the defense
that A should have impleaded X. Is the defense valid? Why?
HOLDERS
(Bar 2001)

ANSWER: The defense is not valid. The liability of X, Y, Z is
joint because solidary liability is not provided for in the note. HOLDERS IN DUE COURSE
Hence, they can be sued for their respective shares. However,
X and Y can invoke as a defense that there is no cause of action QUESTION #1: A is indebted to B in the amount of P100,000.
against them with respect to the proportionate share of Z in In order to raise funds to pay for his obligation, A sold his car
the obligation because only Z is responsible there. to C for P100,000 on 20 January 2001. A agreed to deliver the
car to C on 25 January 2001. However, A convinced A to
NOTE: The instrument involved here is a non-negotiable immediately issue a check and to make the check payable to
instrument because it is payable to a specified person. There B. A informed C that the check will be issued to B because of
is an opinion to the effect that even if it is negotiable, the A’s outstanding obligation. Hence, C issued a check to B to pay
presumption under Sec. 17(g), NIL cannot apply because the for the loan of A payable on 25 January 2001, The check was
instrument states “We promise” rather than “I promise.” A delivered to B through A. B and C were not aware at that time
contrary view is however supported by Republic Planters that the car was sold, it was already destroyed by fire. A
Bank v. CA and Canlas. Nevertheless, even if the liability is fraudulently hid such fact in order to convince C to issue the
solidary, there is still no valid defense because any one of check and to convince B to accept the check. Can B, the payee
them can be held liable for the entire obligation. of the check be considered a HIDC?

5

SAMPLE QUESTIONS
ANSWER: Yes, B can be considered a HIDC. Nothing in the complaint for collection against CHEALSEA for the value of
problem indicates that he is not a HIDC, hence, the the checks. Rule on the complaint of DRAGON. (Bar 1995)
presumption that he is a HIDC stands. All the requirements of ANSWER: DRAGON is not a HIDC. Since the Nis involved are
Sec. 52, NIL are present because it appears that A is a holder crossed checks, there is already a warning to the purchaser,
of the instrument who has taken the instrument complete and DRAGON, that the check was only for deposit to the account
regular on its face, he took it before it was overdue and it was of the payee and it is under obligation to inquire as to the
not previously dishonored; he took it in good faith and for purpose of the issuance of the 2 crossed checks before taking
value and he had no notice of any infirmity in the instrument the checks. Since DRAGON failed to make such inquiry, it shall
or a defect of the title of a prior part. be considered in bad faith.

QUESTION #2: Rolando, intending to buy a car, saw an old NOTE: The problem merely used the word “sold” hence it is
friend, Roger, who is an agent to sell the car belonging to not indicated if there was indeed negotiation to DRAGON. The
Delgado Clinic. After negotiation Rolando decided to buy said answer would be the same if there was no negotiation
car. He drew upon request of Roger, a crossed check for P600 because DRAGON will not even be a holder. It will be an
payable to Delgado Clinic as evidence of his good faith, but assignee that steps into the shoes of the transferor Moises
which was merely meant to be shown to Delgado Clinic by Lim
Roger who received said check. The check would then be QUESTION #4: Po Press issued in favor of Jose a postdated
returned when Roger brings the car and its registration crossed check, in payment of newsprint which Jose promised
certificate for Rolando’s inspection. For failure of Roger to to deliver. Jose sold and negotiated the check to Excel, Inc. at
bring the car and its certificate of registration, and to return a discount. Excel did not ask Jose the purpose of crossing the
the check, Rolando issued a “stop payment order” to the check. Since Jose failed to deliver the newsprint, Po ordered
drawee bank. In the meantime, Roger paid the check to the the drawee bank to stop payment on the check. Efforts of
Delgado Clinic for the hospital bill of his wife and was given Excel to collect from Po failed. Excel wants to know from you
P158.25 as change. May Delgado Clinic be considered a HIDC, as counsel:
hence entitled to recover? (Bar 1977 and 1962) 1) Is Excel a HIDC?
ANSWER: Delgado Clinic may not be considered a HIC, 2) Can Po Press raise absence or failure of consideration
hence not entitled to recover. Although Delgado Clinic was as a defense? (Bar 1994)
not in fact aware of the circumstances with respect to the ANSWER:
delivery of the check to Roger, there are circumstances that 1) Excel is not a HIDC. The instrument involved is a
should have put on inquiry. Thus, it should have noted that crossed check and was supposed to be deposited only.
Rolando had no relation with it; that the amount of the check Excel is therefore obligated to inquire regarding the
did not correspond exactly with the obligation of Roger to the circumstances involving the issuance of the check.
clinic; and that the check is a crossed check, which means that Failure on his part, as in this case, will. Prevent him from
the check could only be deposited but may not be converted becoming a HIDC; such failure or refusal constituted bad
into cash should have put the clinic to inquiry as to the faith.
possession of the check by Roger, and why he used it to pay 2) YES. Since Excel is not a HIDC, Excel is subjected to the
his accounts. personal defense which Po Press can set up against Jose.
There was a failure of consideration in the problem
QUESTION #3: On 12 October 1993, Chealsea Straights because Jose failed to deliver the newsprint to Po Press
(CHEALSEA), a corporation engaged in the manufacture of
cigarettes, ordered from Moises Lim 2,000 bales of tobacco. SHELTER RULE
CHEASEA issued to Moises Lim 2 crossed checks postdated
15 May 1994 and 15 April 1994 in full payment therefore. On QUESTION: Larry issued a negotiable PN to Evelyn and
19 January 1994 Moises Lim sold to Dragon Investment authorized to Evelyn to fill up the amount in blank with his
(DRAGON) at a discount the 2 checks drawn by CHEALSEA in loan account in the sum of P1,000. However, Evelyn inserted
his favor. P5,000 in violation of the instruction. She negotiated the note
Moises Lim failed to deliver the bales of tobacco as to Julie who had knowledge of the infirmity. Julie in turn
agreed despite CHEALSEA’s demand. On 1 March 1994 negotiated said note to Devi for value and who had no
CHEALSEA issued a stop payment order on the 2 checks knowledge of the infirmity. Supposing Devi endorsersed the
issued to Moises Lim. DRAGON, claiming to be a HIDC, filed a note to Baby for value but who has knowledge of the infirmity,
can the latter enforce the note against Larry? (Bar 1993)

6

SAMPLE QUESTIONS
ANSWER: YES. The problem indicates that Baby is not a HIDC. stands on the same footing as a certified check. For all intents
When she took the instrument, she had knowledge of the and purpose, the payee becomes the depositor of the drawee
breach of trust committed by Evelyn against Larry. However, bank, with rights and duties of one in such a situation. In
she has all the right of a HIDC because she took the instrument addition, by accepting the P100,000 check from Ms. WS and
from Devi, a HIDC. Although Baby is not a HIDC, she did not issuing a manager’s check in favor of Ms. O, P Bank assumed
participate int eh breach of trust committed by Evelyn. Hence, the liabilities of an accepter under Sec. 62, NIL which
Larry cannot set up the defense that the instrument was contemplates that an acceptor engages to pay according to
completed in breach of trust against Baby because such the tenor of his acceptance (Equitable PCI Bank v. Rowena
defense is a personal defense. Ong)

PARTIES WHO ARE LIABLE INDORSERS OF BEARER INSTRUMENTS

QUESTION #!: Anna makes a PN payable to bearer and
ACCEPTOR
delivers it to Bing. In turn, Bing negotiates it by mere delivery

to Carmen, who endorsers it specifically to Dong. Dong
QUESTION: Whether or not the drawee bank that pays the
negotiates it by special indorsement to Emma, who negotiates
value of the check but does not accept the same is still liable
it to Fe by mere delivery. Anna did not pay. To whom are Bing,
for the warranties of an acceptor under Sec. 62.
Carmen, Dong, and Emma liable? (Bar 1988)
ANSWER: The drawee does not warrant if it does not accept
ANSWER: Bing negotiated the instrument by mere
the checks (PNB v. National City Bank of New York, et al).
delivery hence she is not secondarily liable at all. She is
EXPLANATION: The warranty established by Sec. 62 is in
only liable for breach of warranty to her immediate
favor of holders of the instrument after acceptance and when
transferee but no such breach appears in the given problem.
the drawee bank cashes or pays the check, the cycle of
Carmen is secondarily liable to Dong and Emma
negotiation is terminated, and it is illogical thereafter to
only. A person who indorses a bearer instrument is liable
speak of the subsequent holders who can invoke the warranty
only to persons who acquire title through his indorsement
provided in Sec. 62 against the drawee.
(Sec. 40, NIL). In the given problem, only Dong and Emma

acquired their titles through the indorsement of Carmen. Fe
QUESTION #1: Ms. WS deposited in her checking account at
cannot trave her title from the indorsement of Carmen. Fe
P Bank a check in the amount of P100,000. The drawer of the
cannot trace her title form the indorsement of Carmen hence
check is Mr. X and the drawee is C Bank. The following day,
Carmen is not secondarily liable to Fe.
upon inquiry by Ms. WS, P Bank confirmed that the check was
For the same reason, Dong is secondarily liable
already cleared. Hence, Ms. WS issued 2 checks to Ms. O one
only to Emma because Emma’s title was derived from the
for P60,000 and another for P40,000 drawn against her
indorsement of Dong.
checking account with P Bank. One the same day, Ms. O
Dong is not secondarily liable to Fe because the
presented the checks to P Bank for payment. However,
latter cannot trace her title from the indorsement of Dong.
instead of getting cash, Ms. O requested that a manager’s
Emma is liable to Fe because she4 is an immediate party. Fe
check in the amount of P100,000 be issued to her by P Bank.
is also liable to Emma if there is a breach of warranty.
P Bank issued a manager’s check to Ms. O in the amount of

P100,000 which Ms. O deposited in her account with E Bank.
QUESTION #2: X draws a check payable against his current
Later, Ms. O received notice from E Bank that the manager’s
account with the Ortigas Branch of Bonifacio Bank in favor of
check that she deposited was dishonored because P Bank
B. Although X does not have sufficient funds, the bank honors
stopped its payment. When Ms. O confronted the officers of P
the check when it is presented for payment. Apparently, X has
Bank, she was informed that the check which WS deposited
conspired with the bank’s bookkeeper so that his ledger card
which was drawn against the account of Mr. X in C Bank was
would show that he still has sufficient funds. The bank files an
dishonored by the latter because the said account of Mr. X was
action for recovery of the amount paid to B because the check
already closed. Did P Bank validly dishonor the manager’s
presented has no sufficient funds. Decide the case. (Bar 1998
check?
and 1970)
ANSWER: NO, P Bank invalidly dishonored the manager’s
ANSWER: The bank cannot recover the amount paid to B
check. The manager’s check becomes the primary obligation
for the check. Although payment of a check is not equivalent
of the bank which issues it and constitutes its written promise
to acceptance, the drawee who pays a check is liable as an
to pay upon demand. The mere issuance of the manager’s
check is considered an acceptance thereof and the same check

7

SAMPLE QUESTIONS
acceptor. As acceptor, the bank became primarily liable to the d) Assume that Eternal Bank was not closed by Central
payee, B. Bank but simply refused to honor and encash the
The cause of action of the bank is against X and its check. Can Kahusayan hold Masikap liable? (Bar
bookkeeper who conspired to make X’s ledger show that he 1986)
has sufficient funds ANSWER:
a) The drawer, Masikap, is secondarily liable to the
QUESTION #3: A drew a check for P1,000 on B, the bank, holder Kahusayan. When an instrument is dishonored
payable to the order of C and delivered the check to the latter and the proper proceedings are duly taken, the holder
for value. C indorsed the check in blank and negotiated it to D, has an immediate right of recourse against the drawer of
who lost it. At D’s request, A ordered payment stopped by the instrument.
notifying B. The stop order was overlooked and the check was b) The problem does not state if the instrument is a bearer
paid to E, who had taken the check, without actual knowledge instrument or an order instrument. It also does not state
of the loss, in payment of merchandise sold to a stranger how the instrument was negotiated to Kahusayan. If the
whom he though owned the check. D now sues the bank, B, check was negotiated by delivery, Humimok would
for the amount of the check. Decide the case. (Bar 1979) not be secondarily liable. On the other hand,
ANSWER: The suit of D against the bank may not prosper. Humimok is secondarily liable if he indorsed the
A check of itself does not operate as an assignment of any part check as a general indorser to Kahusayan. Humimok
of the funds to the credit of drawer with the bank, and the would not be secondarily liable if his indorsement is
bank is not liable to the holder, unless it accepts or certifies qualified. Humimok would also be liable for breach of
the check (Sec. 189, NIL). There is no privity between the warranty but the same does not appear to be present.
bank and D. This is true even if D is a holder. D is not even the c) Yes, Kahusayan can still collect from Humimok what
holder of the check in question because he lost the same. may be due for the dental work done. Delivery of a
check is not deemed payment unless the same is
QUESTION #4: Mr. Lim issued a check drawn against BPI in encashed, Since the check was not honored, the
favor of Mr. Yu as payment for certain shares of stock which obligation of Humimok remains.
he purchased. On the same day that he issued the check to Mr. d) The liability of Masikap remains. The secondary
Yu, Mr. Lim ordered to stop payment per standard banking liability of Masikap to Kahusayan does not depend on the
practice, Mr. Lim was made to sign a waiver of BPI’s liability capability of the drawee to honor the instrument. The
in the event that it should pay Mr. Yu through oversight or secondary liability operates so long as the drawee bank
inadvertence. Despite the stop order by Mr. Lim, BPI fails or refuses to pay and the necessary proceedings for
nevertheless paid Mr. Yu upon presentation of the check. Mr. dishonor are duly taken (Sec. 61, NIL)
Lim sued BPI for paying against his order. Decide. (Bar 1991) QUESTION #6: Ms. G is an employee of R Bank. His mother,
ANSWER: In the event Mr. Lim had sufficient legal Mrs. EV is the holder of a foreign check in the amount of
reasons to issue the stop payment order, he may sue BPI P7,500 drawn by Mr. DZ against W Bank of Los Angeles,
for paying against his order. The bank is still liable for its California. R Bank gives special accommodations to its
failure to exercise due diligence despite the waiver executed employees to receive the check’s value without waiting for
by Mr. Lim the clearing period. Accordingly, Ms. G was allowed to encash
the foreign check by R Bank before it was cleared but after it
QUESTION #5: As payment for goods received, Masikap gave was indorsed by Ms. G. In accepting the check, one of R Bank’s
to Humimok on November 3, his check drawn on the Eternal officers endorsed or signed the check after placing the
Bank of Manila. On November 11, Kahusayan went to Eternal notation “up to P17,500 only.” Later, the check was
Bank to encash the check. He could not cash the check dishonored by W Bank on ground that it was irregularly
because on November 10, Central Bank had forbidden Eternal indorsed because of the notation that was made by the bank’s
Bank to do business in the PH on grounds of insolvency. officer. R Bank now seeks to recover from Mrs. EV and Ms. G
Masikap, Humimok and Kahusayan all reside in Manila. on the ground that they liable as indorsers under Sec. 66 of
a) Can Kahusayan hold Masikap liable on the uncashed the NIL. Will the claim of R Bank prosper.
check? ANSWER: NO, the claim will not prosper. Although Mrs. EV
b) Can Kahusayan hold Humimok liable on the check? and Ms. G were endorsers, their liabilities and warranties
c) Can Kahusayan still collect from Humimok for the under Sec. 66 in favor of subsequent holders extend only to
dental work done on the latter? the state of the instrument at the time of their indorsement
and such liabilities and warranties cannot be used by the

8

SAMPLE QUESTIONS
party who introduced a defect on the instrument. The instrument knew him to be only an accommodation party.
secondarily liability of endorsers must be read in the light of Thus is the nature or the essence of accommodation.
the rule in equity that those who come to court should come
with clean hands. The holder or subsequent endorser who QUESTION #3: Nora applied for a loan P100,000 with BUR
tries to claim the instrument which has been dishonored bank. By way of accommodation, Nora’s sister, Vilma,
because of an irregular indorsement must not be the endorser executed a PN in favor of BUR bank. When Nora defaulted,
himself that gave the cause for dishonor. Otherwise, a clear BUR bank sued Vilma, despite its knowledge that Vilma
injustice may simply make the instrument defective and later received no part of the loan. May Vilma be held liable? (Bar
claim from prior endorsement who have no knowledge or 1996)
participation in causing or introducing said defects to the ANSWER: YES, Vilma may be held liable. Vlima, as an
instrument which thereby caused its dishonor (Melca Theresa accommodation maker is liable on the instrument to a holder
Alviar Gonzales v. Rizal Commercial Banking Corporation) for value such as BUR bank even if in fact he did not receive
any consideration therefor. Vilma is liable even if BUR bank
ACCOMODATION PARTIES was aware at the time it took the instrument that Vilma is
merely an accommodation party and received no part of the
QUESTION #1: For the purpose of lending his name without loan
receiving value therefore, Pedro makes a note for P20,000
payable to the order of X who in turn negotiates it to Y, the QUESTION #4: A purchased some merchandise from B for
latter knowing that Pedro is not a party for value. P1,000. Not having any cash, A offered to pay in check. B
a) Can Y recover from Pedro? refused to accept the check unless it is indorsed by X. X
b) Supposing under the same facts, Pedro pays the said indorsed A’s check, and B knowing that X had not received
P20,000, may he recover the same amount from X? value for indorsing the check, accepted it. Upon maturity, B
(Bar 1998) presented the check to the drawee bank for payment.
ANSWER: Payment was refused for lack of funds. B gave notice of
a) Yes, Y can recover from Pedro. Pedro is an dishonor, in accordance with law to X, but X refused to pay. Is
accommodation party hence he is liable to a holder for X liable to B? (Bar 1976)
value even if he did not receive any consideration for ANSWER: YES, X is liable to B. X, as accommodation indorser
making the instrument. Defense of absence of is liable to B who is a holder for value although the latter may
consideration cannot be validly interposed by know that he is a mere accommodation party. X as indorser is
accommodation maker against a HIDC. secondarily liable even if he is only an accommodation party.
b) Yeas, Pedro can recover the amount from X. X is the He is liable if the check is dishonored upon due presentment
accommodated party or the party ultimately liable for and notice of dishonor was duly given
the instrument. Pedro is only an accommodation party.
Otherwise, it would be unjust enrichment on the part of QUESTION #5: On 1 June 1990, A obtained a loan of P100,000
X if he is not to pay Pedro. from B, payable not later than 21 December 1990. B required
A to issue him a check for that amount to be dated 20
QUESTION #2: To accommodate Carmen, maker of a PN, December 1990. Since he does not have any checking account,
Jorge signed as indorser thereon, and the instrument was A with the knowledge of B, requested his friend C, president
negotiated to Raffy, a holder value. At the time Raffy took the of X Banking Corporation, to accommodate him. C agreed, he
instrument, he knew Jorge to be an accommodation party signed a check for the aforestated amount, dated 20
only. When the PN was not paid, and Raffy discovered that December 1990, drawn against X Banking Corporation with
Carmen had no funds, he sued Jorge. Jorge pleads in defense the ABC Commercial Banking Corporation. The by-laws of X
the fact that he had indorsed the instrument without Banking Corporation requires that checks issued by it must
receiving value therefor, and the further fact that Raffy knew be signed by the President and the Treasurer or the Vice-
that at the time he took the instrument Jorge had not received President. Since the Treasurer was absent, C requested the VP
any value or consideration of any kind for his indorsement. Is to co-sign the check, which the latter reluctantly did. The
Jorge liable? (Bar 1990) check was delivered to B. The check was dishonored upon
ASNWER: YES, Jorge is liable. Sec. 29, NIL provides that an presentation on due date for insufficiency of funds.
accommodation party is liable on the instrument to a holder a) Is X Banking Corporation liable on the check as an
for value, despite that the holder at the time of taking of said accommodation party?

9

SAMPLE QUESTIONS
b) If it is not, who then, under the above facts, is/are the ANSWER:
accommodation party? a) YES. A can collect from M. Notwithstanding the fact that
ASNWER: P is a minor, the indorsement of P (the minor) passes
a) X Banking Corporation is not liable because the act of title to A. The holder. M cannot invoke the defense of
accommodating the check is an ultra vires act. It is minority because such defense would only be available
outside the powers of a corporation to accommodate to P.
another not in line with its own business. b) NO. A cannot collect from P, as he has a real defense of
b) The president and VP who signed for X Banking minority on his part.
Corporation are liable to the instrument in their
personal capacities. (Crisologo Jose v. CA) NON-DELIVERY AND CONDITIONAL DELIVERY

QUESTION #6: Santos purchased Vera’s car for P50,000. Not Question: Jun was about to leave for a business trip. As his
having enough cash at hand, Santos offered to pay in check. usual practice, he signed several blank checks. He instructed
Vera refused to accept the check unless it is indorsed by Ruth, his secretary, to fill them as payment for his obligations.
Reyes, their mutual friend. Reyes indorsed Santos’ check and Ruth filled one check with her name as payee, placed
Vera, knowing that Reyes had not received any value for P30,000.00 thereon, endorsed and delivered it to Marie. She
indorsing the check, accepted it. The next day, Vera presented accepted the check in good faith as payment for goods she
the check to the drawee bank for payment. Payment was delivered to Ruth. Eventually, Ruth regretted what she did
refused for lack of funds. Vera gave notice of dishonor to and apologized to Jun. Immediately he directed the drawee
Reyes, but Reyes refused to pay, saying that he indorsed bank to dishonor the check. When Marie encashed the check
merely as a friend. In the event Reyes voluntarily pays Vera, it was dishonored.
does Reyes have a right to recover from Santos? Supposing the check was stolen while in Ruth's
ANSWER: YES, Reyes can recover from Santos. The possession and a thief filled the blank check, endorsed and
relation between Santos and Reyes is in effect that of delivered it to Marie in payment for the goods he purchased
principal and surety, the accommodation party. Reyes, being from her, is Jun liable to Marie if the check is dishonored?
the surety, or Santos, can recover from the latter whatever (2006 Bar)
amount that he paid to Vera (PNB v. Maza & Macenas) Answer: NO. The check is an incomplete instrument not
delivered in contemplation of law. An incomplete instrument
DEFENSES not delivered is not a valid contract in the hands of any holder
as against any person whose signature was placed thereon

before delivery. As such, Jun is not liable to Marie since he
MINORITY
does not assume any responsibility whatsoever upon the said

check. He is a party prior to the unauthorized completion and
QUESTION: X makes a PN for P500 payable “to the order of
delivery (NIL, Sec. 15).
A,” a minor, to help him buy school books. A indorses the note

to B who, in turn, indorses the note to C. C knows A’s minority.
QUESTION #1: Jose makes a note payable to bearer with the
If C sues X on the note, can X set up the defenses of minority
amount blank and delivers it to Karen for safekeeping. Marina
and lack of consideration? (Bar 1989)
fills up the note for P20,000 and negotiates it to Adriano. Can
ANSWER: X cannot set up the defense of minority of A.
Jose dishonor the note and refuse payment to Adriano on the
Although minority is a real defense, such defense is person to
ground that the note was incomplete and was originally
the minor and cannot be invoked by other parties. This is
delivered to Karen for safekeeping only and not for
specially true in the case of X, the maker, who warrants that
negotiating? (Bar 1997)
the payee has capacity to contract. X is therefore barred from
ANSWER: Yes, Jose can dishonor the note. Jose can invoke
claiming that the payee is a minor because of his warranties.
the defense of non-delivery of an incomplete instrument.

Although Jose delivered the instrument to Karen for
QUESTION: A executed a promissory note in favor of M which
safekeeping, it is not clear how Marina obtained the
reads: “I promise to pay P (16 years old) or order P10,000.”
instrument. When an incomplete instrument has not been
Sgd. M
delivered it will not, if completed and negotiated without
a) May A collect from M notwithstanding that P, the
authority, be a valid contract in the hands of any holder as
indorser is a minor?
against any person whose signature was placed thereon
b) In case that A cannot collect from M, can he collect
from P?

10

SAMPLE QUESTIONS
before delivery (Sec. 15, NIL). It does not matter if Adriano is all respects what if purports to be and that he has food
a HIDC because the defense involved is a real defense. title to it. Therefore, he is liable for breach of warranty.
d) F may enforce the instrument against C if the latter
QUESTION #2: Jose Reyes signed a blank check, and in his indorsed the instrument provided that the proper
haste to attend a party, left the check on the top of his proceedings for dishonor are duly taken and F obtained
executive desk in his office. Later, Nazareno forced open the his title through the indorsement of C. an indorser is
door to Reyes’ office, and stole the blank check. Nazareno liable for breach of his warranties
immediately filled in the amount of P50,000 and a fictitious
name as payee on the said check. Nazareno then endorsed the FILLING UP BLANKS BEYOND AUTHORITY
check in the payee’s name and passed it to Roldan. Thereafter,
Roldan endorsed the check to Dantes. QUESTION #1: Larry issued a negotiable PN to Evelyn and
a) Can Dantes enforce the check against Jose Reyes? authorized the latter to fill up the amount in blank with his
b) If Dantes is a HIDC will your answer to the first loan account in the sum of P1,000. However, Evelyn inserted
question be the same? (Bar 1985) P5,000 in violation of the instruction. She negotiated the note
ANSWER: to Julie who had knowledge of the infirmity. Julie in turn
a) Dantes cannot enforce the instrument against Jose negotiated said note to Devi for value and who had no
Reyes. Jose Reyes can raise the defense that the knowledge of the infirmity. Can Devi enforce the note against
incomplete instrument was not delivered since the Larry and if she can, for how much? (Bar 1993)
check was only stolen and fill up by Nazareno. ANSWER: YES, Devi can enforce the negotiable PN against
b) My answer will be the same even if Dantes is a HIDC. Larry. The defense of Larry is a mere personal defense under
If an incomplete instrument has not been delivered, it Sec. 14, NIL. The law provides that if an instrument is wanting
will not, if completed and negotiated without authority in any material particular is completed beyond the authority
be a valid contract against any holder, even a HIDC. (Sec, that was given, it is valid and effectual for all purposes in the
NIL) hands of a HIDC and he may enforce it as if it had been filled
up strictly in accordance with the authority give. Thus, Devi
QUESTION #3: A signed a blank check, which he can enforce the instrument against Larry for P5,000
inadvertently left on his desk at his Escolta office. The same
was later stolen by B, who filled in the amount of P22,300 and QUESTION #2: A, single proprietor of a business concern, is
a fictitious name as payee. B then endorsed the check in the about to leave for a business trip and, as he often does on
payee’s name and passed the check to C; thereafter passed it these occasions, signs several check in blank. He instructs B,
to D; then D to E, and E to F. his secretary, to safekeep the checks and fill them out when
a) Can F enforce the instrument against A? and as required to pay accounts during his absence. B fills out
b) Suppose that F is a HIDC, what will be your answer one of the checks by placing her name as payee, fills in the
c) Can F enforce the instrument against B? amount and endorses and delivers the check to C who accepts
d) Against C? (Bar 1978) it in good faith as payment for goods sold to B. B regrets her
ANSWER: action and tells A what she did. A directs the Bank in time to
a) NO, F cannot enforce the instrument against A. the dishonor the check. When C encashes the check , it is
instrument was an incomplete instrument and was not dishonored. Can A be held liable to C? (Bar 1997)
delivered by A. it was likewise not completed with ANSWER: YES, A can be held liable by C, provided that the
authority of A. hence, it is not a valid contract in the appropriate proceeding for dishonor was duly taken. The
hands of any holder (Sec. 15, NIL) instrument in this case was an incomplete instrument but
b) My answer is still NO even if F is a HIDC. Non-delivery delivered as it was entrusted to B, the secretary of A. Under
of an incomplete instrument is a real defense that can be Sec. 14, NIL, when an instrument is wanting in any material
raised even against a HIDC. particular, the person in possession thereof has prima facie
c) YES, F can enforce the instrument against B. His authority to complete it by filling up the blanks therein. Any
wrongdoing prevented the recover from the maker; a instrument that is completed is valid and effectual for all
wrongdoer should always be made liable for any damage purposes in the hands of a HIDC.
that was proximately caused thereby. Moreover, when In fact, even if the instrument cannot be considered
the thief indorsed the instrument in an assumed as actually delivered when it was delivered to the secretary,
(fictitious) name, he warranted that the instrument is in the doctrine of comparative negligence also precents A
from raising the same as defense. As between A and C, both

11

SAMPLE QUESTIONS
innocent parties, it was the negligence of A in entrusting the genuineness of the check and that the check is in all respects
check to B which is the proximate cause of the loss what it purports to be

FRAUD QUESTION #2: In consideration of some goods he bought, A
issued to B a personal check in the amount of P280. Without
QUESTION: A induces B by fraud to make a PN payable on the knowledge of A, B raised the amount of P2,800. The
demand to the order of A in the sum of P5,000,000. alteration is not apparent to the naked eye. B then deposited
a) Can A file an action successfully against the maker B the altered check in his account with the PNB, which released
for the amount of the note? it for clearing. The Bank of PI, which is the drawee bank, did
Going further, A transfers the note to C who pays P5,000 not notice the alteration and the check was therefore cleared.
therefor and acquires the note under circumstances that B was able to withdraw the P2,800. After which he
make him (C) a HIDC. closed his account. When A received his bank statement and
b) Can C file an action successfully against B, the maker cancelled checks for that month, he noticed the discrepancy
of the note, for the amount of the note? in the amount when he compared the altered check with his
ANSWER: check stub. He immediately notified then in turn demanded
a) NO, B may raise the defense of fraud in inducement recredit from the BPI, which cannot now locate B. Discuss the
against A who is not a HIDC. This is specially true in right and liabilities of the parties under the circumstances.
this case where A was the one who fraudulently induced (Bar 1977)
B to issue the note ANSWER: BPI should recredit the account of A. Under Sec.
b) YES, C can file an action successfully against B. C is 124, NIL, a material alteration avoids the instrument, except
presumed to be a HIDC. Hence, in the absence of proof as to those who made, authorized, or assented to the
that he is not, he is a HIDC who is free from personal alteration and subsequent indorsers. B, the holder of the
defenses including fraud in inducement. check is not a HIDC and he was even the note who caused the
alteration, hence, the instrument is avoided as to B.

BPI can, in turn, collect whatever amount that it
MATERIAL ALTERATION
returned to A from the collecting bank, PNB. The alteration is

covered by the warranties of the colleting bank. If the clearing
QUESTION #1: Mario De Guzman issued to Honesto Santos a
was done through the PCHC, the drawee can file a claim
check for P50,000 as payment for the second-hand car.
against the collecting bank within the period prescribed by
Without the knowledge of Mario, Honesto changed the
law. Whatever amount that may be paid by the collecting
amount of P150,000 which alteration could not be detected
bank can be recovered from B.
by the naked eye. Honesto deposited the altered check with

Shure Bank which forwarded the same to Progressive Bank
for payment. Progressive Bank without noticing the ABSENCE OR FAILURE OF CONSIDERTAION
alteration paid the check, debiting P150,000 from the account
of Mario. Honesto withdrew the amount of P150,000 from QUESTION #1: NM issued 2 post-dated checks to CV, as
Shure Bank and disappeared. After receiving his bank security for pieces of jewelry to be sold. Each check has a face
statement, Mario discovered the alteration and demanded value of P50,000. Thereafter, CV negotiated the check to SIH,
restitution from Progressive Bank. Discuss the rights and Inc. without the knowledge of NM. NM returned the jewelries
liabilities of the parties concerned. (Bar 1995) to CV and tried to retrieve the checks. Having failed to do so,
ANSWER: Progressive Bank, the drawee of the check, NM withdrew her funds from the drawee bank and the checks
should comply with the demand of Mario for restitution were consequently dishonored when presented for payment.
of the amount of P150,000 to his account. Progressive SIH sued NM who interposed the defense that the checks do
Bank has no right to deduct such amount from Mario’s not have any consideration. However, NM did not present
account. The order of Mario is to pay P50,000 and material proof that SIH is not a HIDC. Will the defense of absence of
alteration avoids the instrument (Sec. 124, NIL). Progressive consideration prosper against SIH? (Bar 1993)
Bank is also responsible for the negligence of its employees in ANSWER: NM cannot invoke the defense of absence of
not noticing the alteration. consideration against SIH. There is no showing that SIH is
As between Progressive Bank and Shure Bank, the not a HIDC, hence, the presumption on due course holding
latter is liable provided no negligence can be ascribed to stands. As a HIDC, SIH is free from personal defenses of prior
Progressive Bank. As a collecting bank, Shure warrants the parties.

12

SAMPLE QUESTIONS
QUESTION #2: On 1 March 1996, Pentium Company ordered recovery from M. He is in effect the maker of the
a computer from CD Bytes and issued a crossed check in the instrument.
amount of P30,000 post-dated 31 March 1996. Upon receipt b) YES, the answer would still be the same if the
of the check CD Bytes discounted the check with Fund House. instrument is bearer instrument. The forged
On 1 April 1996, Pentium stopped payment of the check for signature of M is still inoperative as to him.
failure of CD Bytes to deliver the computer, thus, when Fund The indorsers are still secondarily liable
House deposited the check, the drawee bank dishonored it. If because the NIL provides that persons who indorse
Fund House files a complaint against Pentium and CD Bytes bearer instruments are liable subsequent parties who
for the payment of the dishonored check, will the complaint acquired title through their indorsement. In this case, D
prosper? acquired title through the indorsement of A, B, and C.
ANSWER: The complaint will prosper only against CD
Bytes but not against Pentium Company. Fund House is not B. Indorser’s Signature – Order Instruments
a HIDC because it took crossed checks that were meant for
Pentium. A person who takes crossed checks is deemed QUESTION #1: Jose loaned Mario some money and, to
warned of the purpose of the checks and he is bound to evidence his indebtedness, Mario executed and delivered to
inquire from the original parties regarding the circumstances Jose a PN payable to his order. Jose endorsed the note to
with respect to tis issuance. Had it inquired from the parties, Pablo. Bert fraudulently obtained the note from Pablo and
it would have discovered that there was non-delivery of the endorsed it to Julian by forging Pablo’s signature. Julian then
computer. Consequently, such non-delivery or failure of endorsed the note to Camilo. (Bar 1990)
consideration can be raised as a defense by Pentium against a) May Camilo enforce the said PN against Mario and
Fund House. The complaint will prosper against CD Bytes Jose?
because Fund House can enforce its contract. An immediate b) May Camilo go against Pablo?
party is liable to his contracting party. c) May Camilo enforce said note against Julian?
d) Against whom can Julian have the right of recourse?
FORGERY AND WANT OF AUTHORITY e) May Pablo recover from either Mario or Jose?
ANSWER:
Forgery in Notes a) Camilo may not enforce said PN against Mario and
Jose. The PN involved is payable to order. Hence,
A. Maker’s Signature indorsement is necessary to negotiate the instrument to
subsequent parties. The signature of an indorser, Jose,
QUESTION: M, the maker, prepared a PN payable to the order was forged hence such forged signature is wholly
of A, but he did not sign the same and left it inside his drawer. inoperative and no right to enforce payment is acquired
X, a thief stole the instrument, forged M’s signature and by virtue of the forged indorsement (Sec. 23, NIL).
delivered the same to A, A indorsed the instrument B, B in Camilo did not acquire any right against Mario and Jose
turn indorsed it to C, then C to D, the present holder. who were parties prior to the forgery.
a) Against whom can D enforce payment? b) Camilo has no recourse against Pablo because he did
b) Will your answer be the same if the instrument is a not transfer his right over the instrument. He did not
bearer instrument? indorse or deliver the instrument.
ANSWER: c) Camilo may enforce the instrument against Julian.
a) D can enforce payment from X, A, B, and C but not Julian is an indorser after the forger and he is therefore
against M. Under Sec. 23, NIL, the forged signature of M secondarily liable to subsequent parties. He is also liable
is wholly inoperative and no right to enforce payment because of his warranties as an indorser.
was acquired against M by virtue of the forged signature. d) Julian may recover what he paid from the forger Bert
However, the indorsers, A, B, and C are liable who becomes the principal debtor because of his
because they are parties after the forgery and are wrongful act forging a signature in the note.
therefore precluded from setting up such forgery against e) Pablo has a remaining equity of ownership, hence,
the present holder, D. When A, B, and C indorsed the his right to recover from either Mario or Jose
instrument, they warranted that the instrument is remains. Mario is still considered primarily liable to
genuine and in all respects what it purports to be. Pablo who can present the instrument for payment the
On the other hand, the forger will be deemed moment he recovers the instrument. Jose is liable to
the principal debtor because his wrongdoing prevented

13

SAMPLE QUESTIONS
Pablo in case of dishonor and proper proceeding for delivered by E to F hence even if C indorsed the instrument, F
dishonor is duly taken. cannot trace his title from their indorsements

QUESTION #2: Alex issued a negotiable PN payable to Benito QUESTION #2: Juan de la Cruz signs a PN payable to Pedro
or order in payment of certain goods. Benito indorsed the PN Lim or bearer, and delivers it personally to Pedro Lim. The
to Celso in payment of an existing obligation. Later Alex found latter somehow misplaces the said note and Carlos Ros finds
the goods to be defective. While in Celso’s possession, the PN the note lying around the corridor of the building. Carlos Ros
was stolen by Dennis who forged Celso’s signature and endorsers the PN to Juana Bond, for value, by forging the
discounted it with Edgar, a money lender who did not make signature of Pedro Lim. May Juana Bond holder Juan de la
inquiries about the PN. Edgar indorsed the PN to Felix, a Cruz liable on the note? (Bar 1980)
HIDC. When Felix demanded payment of the PN from Alex the ANSWER: Juana Bond may hold Juan de la Cruz liable. The
latter refused to pay. Dennis could no longer be located. PN is payable to bearer hence title is transferred through
a) What are the rights of Felix, if any, against Alex, negotiation by mere delivery of the note. Juana Bond may
Benito, Celso, and Edgar. obtain title even if there is no indorsement.
b) Does Celso have any right against Alex, Benito, and However, Juan de la Cruz may validly incoke the
Felix? (Bar 1995, 1989, 1984) defense of non-delivery of a complete instrument by Pedro
ANSWER: Lim if Juana Bond is not a HIDC. It does not appear however
a) Felix has no right to enforce payment against Alex, that Juana Bond is not a HIDC so she is presumed to be such
Benito, and Celso. Alex, Benito, and Celso are parties HIDC
prior to the forgery and cannot therefore be made liable
by parties subsequent to such forgery. The forged Forgery in Bills of Exchange
signature of Celso is wholly inoperative. (Sec. 23, NIL)
A. Drawer’s Signature
b) Celso has the right to collect from Alex and Benito.
Celso’s equity of ownership over the note remains. In
effect he is the owner of the NI that was stolen as he is QUESTION #1: “B” forged “A’s” signature as drawer of a
the rightful holder thereof. Celso is a party subsequent check drawn on Citibank (drawee bank). The check was
to Alex and Benito and can therefore make them liable. purportedly payable to the order of “B.” “B” then indorsed the
However, Celso has no right to claim against Felix check to “C,” a HIDC, who deposited the same to his account
who is a party subsequent to Celso. Parties after the with the Bank of PI. The check passed through the normal
forgery are cut-off from prior parties. court of clearing and accordingly the drawee, Citibank,
credited the collecting bank, Bank of PI with the amount of
C. Indorser’s Signature – Bearer Instrument the check which Citibank in turn debited from “A’s” deposit
account. Upon receiving his monthly statement from Citibank,
QUESTION #1: A makes a PN payable to B or bearer. A together with the cancelled checks debited from his deposit
delivers the note to B. B indorsers the note to C. C places the account, “A” discovered the forgery. (Bar 1987)
note in his wallet, which was stolen by X, who finding the note, a) Can “A” compel Citibank to re-credit to his account
indorsers it to D, by forging C’s signature. D indorsers the note the amount of the forged check?
b) Does Citibank in turn have a recourse against the
to E, who in turn delivers the note to F, a HIDC, without
indorsement. What are the liabilities of A, B, and C to F? (Bar collecting bank, Bank of PI?
1981) c) Can Citibank or Bank of PI, as the case may be,
ANSWER: A is liable to F, a HIDC. Although X forged the proceed against “B?”
signature of C, the liability of the maker remains because he ANSWER:
engages to pay any bearer of the instrument. Indorsement is a) “A” can compel Citibank to re-credit to his account
not necessary for the title of the holder because the the amount of the forged check. The forged signature
instrument may be negotiated by mere delivery. is wholly inoperative and no right to give discharged
B and C are not liable to F as persons secondarily therefore is acquired by virtue of such forged signature
liable. Indorsers of bearer instruments are liable to those (Sec. 23, NIL). Hence, Citibank did not have any right to
persons who obtain title through their indorsement. F did not pay the check bearing a forged signature. In addition, the
contract between “A” as depositor and Citibank is for the
obtain title through the indorsement of B and C because C’s
signature was forged. Moreover, the instrument was merely latter to pay the depositor himself or whoever may be
authorized 1by the same depositor as evidenced by a
duly issued check. Citibank is also bound to know the

14

SAMPLE QUESTIONS
signature of the drawer and should make sure that the ANSWER: NO, the drawee may not charge the account of
check it is paying bears the signature of its client the trading company. A bank is charged with the knowledge
b) Citibank has not right of recourse against Bank of PI. of the signature of its customer and it should not honor any
Citibank, by paying the check, is responsible for the check bearing a forged signature of the drawer.
warranties of an acceptor. Hence, it is deemed to admit
the genuineness of the signature of the drawer. Besides, B. Indorser’s Signature – Order Instrument
Citibank can be deemed negligent because unlike Bank
of PI, the collecting bank, Citibank as drawee is charged QUESTION #1: To cover his medical bill, A issued a check
with the knowledge of the drawer’s signature. Hence, payable to (the order of) Dr. Prospero Fuego. He put the check
Citibank was in a better position to determine if the in a sealed envelope and gave it to X, his trusted messenger
signature of the drawer is forged. for eight years, for delivery to Dr. Fuego. X, suspecting that the
c) Citibank and Bank of PI can proceed against the envelope contained a check, opened it, forged Dr. Fuego’s
forger B because his criminal act was the proximate signature on the back of the check, and deposited the check in
cause of the damage his own savings account with the PNB. PNB discredited the
QUESTION #2: Placido, a bank depositor, left his checkbook amount of the check to X’s account after it had been cleared
on his desk at his house, Unknown to him, a visitor at the time, by the drawee, the PH Commercial and Industrial Bank
noticing the same, took a check therefrom, filled it up in the (PCIB). When A asked X, Dr. Fuego was out of town but his
amount of P3,000 and succeeded in encashing the check on secretary received the check.
the same day. Placido’s account was thereby debited. One week later, A called Dr. Fuego and was surprised
Discovering the erroneous debit, Placido demanded that his to discover that the latter never got the check. X, feigning
account be credited with a like amount. The bank refused on illness, had been absent for the last 2 days and could not be
the ground that Placido was negligent in leaving his questioned. A immediately went to the PCIB and found that
checkbook on his desk so that he could not put up the defense his check had been cleared 4 days before. Upon PCIB’s
of forgery or want of authority under the NIL. The facts immediate inquiry from PNB, the latter informed that X had
disclose that even to the naked eye, there were marked already been paid the amount of the check and had in fact
differences between Placido’s signature and the one in the closed his account 2 days before.
check forged by the visitor. As between Placido and the bank, A demands that the PCIB recredited his account the
who should bear the loss? amount of the check. PCIB, in turn, demands that PNB
ANSWER: The bank should bear the loss. The forged reimburse it.
signature of Placido is wholly inoperative and no right to give ANSWER: A is entitled to compel PCIB to recredit his
discharge therefor is acquired by virtue of such forged account. The forged signature of an indorser is wholly
signature (Sec. 23, NIL). Hence, the bank did not have any inoperative and no right to enforce payment is acquired
right to pay the check bearing a forged signature. In addition, through the forged signature. The obligation of PCIB to its
the contract between Placido as depositor and the bank is for depositor is to pay A, the depositor himself or whoever may
the latter to pay the depositor himself or whoever may be be authorized by A, that is, to whoever derives titles from A.
authorized by the same depositor as evidenced by a duly PCIB did not therefore pay the check as ordered by A.
issued check. The drawee bank is also bound to know the In turn, PCIB may demand reimbursement from PNB,
signature of the drawer and should make sure that the check the collecting bank. All prior indorsements are guaranteed by
it is paying bears the signature of its client. In this case, there the collecting bank, hence, PNB is deemed to have warranted
is even marked differences between the signature on the that Dr. Fuego’s indorsement is genuine. Having breached its
check and Placido’s signature which could be seen using the warranty, PNB should be made liable to PCIB.
naked eye. Hence, the bank was clearly negligent.
Placido cannot be deemed negligent when he left his QUESTION #2: Monsanto, Inc., drew a check for P5,000
checkbook as the taking by the visitor is not foreseeable (PNB payable to Daez, Inc., drawn against the Manila Bank. The
v. Quimpo) check was endorsed and delivered to Martel Co., which in turn
deposited the check in its current account with the PNB. The
QUESTION #3: Fernando forged the name of Daniel, manager check was cleared in due course, and Manila Bank paid the
of a Trading Company, as the drawer of a check. The BPI, the PNB the amount of the check. 20 days later, it was discovered
drawee bank, did not detect the forgery and paid the amount. that the signature of Daez, Inc. was forged. PNB paid Manila
May the bank charge the amount paid against the account the Bank and notified Martel and Co. that it had debited its
alleged drawer? (Bar 1977)

15

SAMPLE QUESTIONS
account the corresponding amount. Who, as between Martel drawee bank refuses to honor the check, can F enforce the
and Co. and PNB, should bear the loss? Why? (Bar 1976) instrument against the drawer? In case of the dishonor of the
ANSWER: Martel and Co. should bear the loss for 2 check by both the drawee and the drawer, can F hold any of
reasons. As a collecting bank, PNB is just the agent of B, C, and D liable secondarily on the instrument? (Bar 1997)
Martel and Co. with respect to the check that was ANSWER: F can hold the drawer liable but he cannot hold
deposited. Hence, it is the principal, Martel and Co., and not B, C, and D liable. The instrument involved is a NI that is
the agent who should bear the loss. Moreover, banks usually payable to bearer. The holder thereof is whoever is in
require the indorsement of the depositor in case a check is possession of the instrument and indorsement is not
being deposited. If we treat the same indorsement as one necessary for the title of the holder-indorsee. Nevertheless,
made by a general indorser, Martel and Co. warranted that persons who indorse the instrument are liable to those who
it has good title to the instrument acquired title through their indorsement. In this case, F did
not acquire his title through the indorsements of B, C, and D.
QUESTION #3: Hernan issued a check payable to the order of D did not even indorse the instrument and the title of F cannot
Fernando in the sum of P12,000 and drawn on X Bank. The be traced from B and C’s indorsement because of the break
check was delivered to Matilde by Adriano for encashment. At created by the forged indorsement of D. The fact that F is a
that time, the check had the indorsements of Fernando and HIDC is not material because forgery is a real defense
Rosa. When Matilde encashed it with X Bank, she affixed her
signature on the check. Upon Matilde’s receipt of the cash
ENFORCEMENT OF LIABILITY
proceeds of the check she turned over the amount to Adriano.

X Bank was informed that the alleged indorsement of the
PRESENTMENT FOR PAYMENT
payee Fernando was a forgery, since the latter had died 2

years ago. X Bank having refunded the amount to Hernan,
sued Matilde, who refused to return the money. (Bar 1982)
a) Was X Bank correct in paying Hernan?
b) Does X Bank have a cause of action against Matilde?
ANSWER:
a) YES, X Bank was correct in paying Hernan. The forged
signature of the payee is wholly inoperative and no right
to give discharge to the instrument was acquired by X
Bank through the forged signature. When X Bank paid
Matilde, it did not comply with the order of its client.
Hence, it is the duty of the bank to reimburse its client
Hernan.
b) YES, X Bank has a cause of action against Matilde.
Matilde is a general indorser and as such she warrants
that she has good title to the instrument. Having
breached such warranty, she is no responsible to the
collecting bank. Even if she encashed the check for
Adriano as an accommodation party, her liability as an
indorser remains (Sec. 29, NIL). In fact, she is liable even
if she was merely an agent of Adriano as it does not
appear that she disclosed the fact that the check was
delivered to her for encashment.

C. Indorser’s Signature – Bearer Instruments

QUESTION: A delivers a bearer instrument to B. B then Retention of Liability Even if Not Presented

specially indorsers it to C and C later indorses it in blank to D.
QUESTION #1: Gemma drew a check on 13 September 1990.
E steals the instrument from D and, forging the signature of
The holder presented the check to the drawee bank only on 5
D, succeeds in “negotiating” it to F who acquires the
March 1994. The bank dishonored the check on the same
instrument in good faith and for value. If for any reason, the
date. After dishonor by the drawee bank, the holder gave a

16

SAMPLE QUESTIONS
formal notice of dishonor to Gemma through a letter dated 27 QUESTION #2: Mr. M issued an instrument to Mr. P payable
April 1994. to the order of Mr. P. Mr. P then indorsed the instrument to
a) What is meant by “unreasonable time” as applied to Mr. A this way: “Pay to Mr. A, Notice of Dishonor Waived, Sgd.,
presentment? Mr. P.” There is no waiver in the instrument itself. Mr. A
b) Is Gemma liable to the holder? (Bar 1994) thereafter indorsed the instrument to Mr. B who in turn
ANSWER: indorsed the instrument to Mr. C. TO whom is the notice
a) The concept of what is reasonable is relative. binding.
“Reasonable time” has been defined as so much time as ANSWER: The waiver of the notice of dishonor is binding
is necessary under the circumstances for a reasonable only on Mr. P. Mr. A, Mr. B, and Mr. C are not deemed to have
prudent and diligent man to do, conveniently, what the waived notice of dishonor. The notice of dishonor was waived
contract or duty requires should be done, having a after the issuance of the instrument by an indorser and the
regard for the rights and possibility of loss, if any, to the waiver is therefore binding only the indorser who made the
other party (Far Realty Investment, Inc. v. CA) waiver. Consequently, notice of dishonor must be given to Mr.
However, with respect to checks, the SC had taken A and Mr. B but no notice is required to be given to Mr. P.
cognizance of the current banking practice that check
becomes stale after more than 6 months or 180 days Notice is Excused or Unnecessary
(Luis S. Wong v. CA)
b) NO, Gemma is no longer liable to the holder based on QUESTION #1: X draws a BOE against Y in favor of W for
the instrument. Gemma is already discharged from P5,000 requesting the drawee to pay on 24 December 1962.
secondary liability under the check, because W indorsers the instrument to P on 1 September and on 15
presentment and notice of dishonor was made after an September presents it for acceptance. The bill is dishonored.
unreasonable length of time of more than 3 years. The P promptly sues W for payment. Will the case proper? (Bar
1963)
check was already stale at the time of presentment.
However, Gemma may still be liable to the holder ANSWER: The case will not prosper to enforce the secondary
if the latter is her contracting party. Failure to present liability of W. it does not appear that notice of dishonor was
the instrument on time does not totally wipe out all given to W, hence W was discharged.
liability based on contract. Although she may not be However, P may sue W based on their contract. Thus,
liable on the check, she may be liable on their contract if the indorsement was made by W as consideration for the
goods that he purchased, the liability of W to pay for the goods

remains
NOTICE OF DISHONOR

QUESTION #2: A draws a check in favor of B who indorses it
Waiver of Notice
to C. the bank refuses payment for lack of funds. Without
QUESTION #1: To whom is the waiver of notice of dishonor further notice, C filed a complaint against A and B for
made by Mr. M binding in the following example if Mr. P collection. What should be the decision?
indorsed the instrument to Mr. A who in turn indorsed it to B, ANSWER: The case against B to enforce the latter’s secondary
who indorsed it to C, the present holder. liability should be dismissed. The absence of notice of
dishonor discharges the persons secondarily liable. If at all, B

is liable to C based only on their contract.
However, the case against A the drawer should
prosper even in the absence of notice of dishonor. A has no
reason to expect the instrument will be honored because he
did not maintain sufficient funds in his account. Hence, notice
of dishonor is dispensed with.
ANSWER: The waiver of notice of dishonor is binding on
P and all subsequent holders. This is a waiver in the QUESTION #3: A issued a PN to B in the following tenor: “I
instrument itself and therefor binding on all parties. The promise to pay to the order of B )1,000 sixty days after date.
waiver is binding not only on Mr. P, but also Mr. A, Mr. B, and Sgd. A.” The note was subsequently negotiated with proper
Mr. C because Section 110 provides that it is binding on all indorsement by B to C, C to D, and D to E, the holder. When E
parties. Hence, notice of dishonor need not be given to Mr. P, presented the note for payment to A, the latter refused to pay.
Mr. A, and Mr. B to make them secondarily liable. E then gave a notice of dishonor to C only.
a) May E immediately proceed against B, C, and D?

17

SAMPLE QUESTIONS
b) What should C do to protect his rights, if any, against, check is one drawn by a bank’s manager upon the bank itself.
A, B, and D? (Bar 1984) It stands on the same footing as a certified check, which is
ANSWER: deemed to have been accepted by the bank that certified it. As
a) E may not proceed immediately against B or D, but the bank’s own check becomes the primary obligation of the
he may proceed against C. B and D are discharged bank and is accepted in advance by the act of its issuance.
because they were not given by E notice of dishonor S Bank’s argument that there was violation of
(Sec. 89, NIL). However, the liability of C remains banking rules is untenable. Banks are given the discretion
because due notice of dishonor was given to him. to allow immediate drawings on uncollected deposits of
b) C may give notice of dishonor to B protect his manager’s checks, among others. Consequently. R Bank, in
interest against them. Notice of dishonor may be given allowing the immediate withdrawal against the subject
by C to B because B is an indorser who is liable to C. manager’s check, only exercised a prerogative expressly
C has no interest against D because D is not granted to it by the Monetary Board. Moreover, the rules
secondarily liable to him. C may not give due notice of promulgated by the Monetary Board do not alter the
dishonor to D because he is a subsequent party who may extraordinary nature of the manager’s check and the relative
not be compelled to pay by C. rights of the parties thereto. S Bank’s liability as drawer
Notice of dishonor is not necessary in order to remains the same – by drawing the instrument, it admits the
charge A. A is the maker and his primary liability accrues existence of the payee and his then capacity to indorse; and
even in the absence of notice of dishonor. engages that on due presentment, the instrument will be
accepted, or paid, or both, according to its tenor. (SBTC v.
RCBC)
CHECKS

RELATIONSHIP BETWEEN PAYEE, DRAWEE, AND
CASHIER’S AND MANAGER’S CHECKS DRAWER

QUESTION: On 9 January 1981, S Bank issued a manger’s QUESTION: Ms. LV maintains a savings account and a current
check for PHP 8M, payable to “CASH,” as proceeds of the loan account with P Bank with automatic fund transfer from the
granted to G Corporation. On the same day, the 8M check, savings account to the current account. In June, LV deposited
along with other checks, was deposited by C Corporation in a check worth P35,271.60 in her savings account. At that time,
its Current Account with R Bank. Immediately, R Bank she had P35,993.48 in her savings account and P776.93 in her
honored the 8M check and allowed C Corporation to current account. Later that month, LV issued a check in the
withdraw the same. On the next banking day, G Corporation amount of P11,500 in favor of BL. BL thereafter indorsed the
issued a “Stop payment Order” S Bank, claiming that the 8M check of PL. When PL deposited the check, the same was
check was released to a 3rd party by mistake. Consequently, dishonored because it was allegedly drawn against
S Bank dishonored and returned the manager’s check to R insufficient funds. It was discovered later that the check that
Bank. Thereafter, the check was returned back and forth LV deposited was credited 23 days after she deposited the
between the 2 banks, resulting in automatic debits and same because a bank employee misposted the same in
credits in each bank’s clearing balance. R Bank claims that it another account. LV’s previously dishonored check was later
had the right to rely on the integrity of the check which was re-deposited by PL and cleared by the drawee bank. Ms. LV
payable to cash. S Bank argued that R Bank violated the rule thereafter sued P Bank for moral damages. P Bank claims that
of the Monetary Board disallowing banks from honoring it is not liable for moral and exemplary damages because it
checks which are still drawn on uncollected deposits. Whose was in good faith and had even profusely apologized for the
position is tenable? error. Will the claim for moral and exemplary damages
ANSWER: R Bank’s position is tenable. In immediately prosper?
crediting the amount of *M to Corporation’s account, R Bank ANSWER: The claim will prosper. A bank is under
relied on the integrity and honor of the check as it is regarded obligation to treat the accounts of its depositors with
in commercial transactions. Where the questioned check, meticulous care whether such account consists only of a few
which was payable to “CASH,” appeared regular on its face, hundred pesos or of millions of pesos. Responsibility arising
and the bank found nothing unusual in the transaction, as the from negligence in the performance of this obligation is
drawer usually issued checks in big amount made payable to demandable. While the bank’s negligence was not attended
cash, R Bank cannot be faulted in paying the value of the with malice and bad faith, nevertheless, it caused serious
questioned check. The questioned check issued by S Bank is anxiety, embarrassment and humiliation. The fact remains
not just an ordinary check but a manager’s check. A manager’s

18

SAMPLE QUESTIONS
that the bank has committed a serious error. Consequently,
moral damages should be awarded.
Exemplary damages should likewise be awarded.
The public relies on the bank’s sworn profession of diligence
and meticulousness in giving irreproachable service. The
bank clearly breach the same in this case. (Prudential Bank v.
CA; Simex International Manila, Inc. v. CA; BPI v. IAC; PNB v. CA)

19

NEGO Q&amp;As (Sky Notes)

Uploaded by

Document Information

Original Description:

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

NEGO Q&amp;As (Sky Notes)

Uploaded by

Copyright:

Available Formats

NEGOTIABLE

transaction. of negotiability specified in Sec. 1, NIL, can the instrument

still be considered negotiable as between the parties on the

starting 15 July 1978 and every 15th month thereafter until

fully paid… QUESTION #2: Can a BOE or a PN qualify as a NI if

withdrawal of the US of its military bases in the Philippines. ANSWER:

where payable are not stated. (Bar 1988) Sec. 1, NIL

the name of any person. The name of a payee (cash) is an

NI? (Bar 1989)

ANSWER: The PN is not negotiable because it is neither Additional Provisions

Hence, they can be sued for their respective shares. However,

car to C on 25 January 2001. However, A convinced A to

PARTIES WHO ARE LIABLE INDORSERS OF BEARER INSTRUMENTS

merely an accommodation party and received no part of the

receiving value therefore, Pedro makes a note for P20,000

ANSWER: Payment was refused for lack of funds. B gave notice of

accommodation party hence he is liable to a holder for X liable to B? (Bar 1976)

the instrument. Pedro is only an accommodation party.

A to issue him a check for that amount to be dated 20

as against any person whose signature was placed thereon

FRAUD QUESTION #2: In consideration of some goods he bought, A

issued to B a personal check in the amount of P280. Without

ANSWER: check stub. He immediately notified then in turn demanded

alteration, hence, the instrument is avoided as to B.

Progressive Bank. As a collecting bank, Shure warrants the parties.

credited the collecting bank, Bank of PI with the amount of

account. Upon receiving his monthly statement from Citibank,

1981) c) Can Citibank or Bank of PI, as the case may be,

ANSWER: A is liable to F, a HIDC. Although X forged the proceed against “B?”

signature of C, the liability of the maker remains because he ANSWER:

goods that he purchased, the liability of W to pay for the goods

dishonor discharges the persons secondarily liable. If at all, B

You might also like

NEGO Q&As (Sky Notes)

NEGO Q&As (Sky Notes)