MATERIAL ALTERATION (real defense as to the material alteration but HDC can recover as

to the original tenor)

= any change in the instrument which affects the liability of the parties in any way as specified in
Sec 125 (date, sum payable, time or place of payment, number or relations of parties, medium or
currency for payment, or which adds place of payment where no place of payment is specified or
other change which alters effect of the instrument)

Sec 124 Alteration of instrument, effect of:

IF without assent of all parties liable, avoided E: as against party who has himself made,
authorized or assented to such; and subsequent indorsers
IF in the hands of HDC (not a party to the alteration) such holder may enforce payment accdg to
original tenor
- Effect of material alteration
o GR: DISCHARGE the instrument and all prior parties who did not give consent
to such
o E: if against
 Party who MADE the alteration
 Party who AUTHORIZED/ASSENTED the alteration
 Indorsers SUBSEQUENT to the alteration (cuz sec 66 w that I is genuine
and in all respects what it purports to be)
- EX.
I promise to pay B or order 100K on dec 25 2023
Sgd A
B negotiates to C who, with the consent of B raises the amount to 150K and thereafter indorses it
to D, D to E and E to F,
- The note is discharged as to A (A did not assent to such change)
- hence, F cannot enforce 150K against A.
- even if F is HDC, he still cannot enforce the altered amount since A has real defense of
material alteration against F
- However F as HDC can enforce 100k accdg to its original tenor regardless of whether the
alteration was innocent or fraudulent
- IF F is nonHDC, he cannot enforce 100K.
- C, however would be liable to F for 150K as C is the party who himself MADE the
alteration. Also, C warrants that instrument is genuine and in all respects what it purports
to be
- B is also liable to F for 150K since B is the party who ASSENTED the alteration
- D and E are also liable for 150K as they are subsequent indorsers from the alteration

- Effect of material alteration by a stranger: no effect upon instrument if original

meaning can be ascertained
o Spoliation = material alteration made by stranger
 Sec 124&125 Material Alteration Sec 23 Forgery
Forgery on any other material Forgery as to the signature of drawer/indorser
Personal defense-instrument is not avoided as Real defense
to HDC since holder may still enforce the
original tenor
REAL defense as to the fact that HDC cannot
enforce payment as to the altered version of
the instrument)

- Rights of HDC: enforce orig tenor; and recover altered tenor to any party who did not
avoid nonhdc
- Right to collect original consideration
- Where drawee bank pays altered amount, DRAWER HAS THE RIGHT to have his
account debited with the correct amount only
- Banks are bound by the 24-hour clearing house rule and must notify the collecting banks
within 24 hours of alteration of checks

Sec 125 What constitutes a material alteration = any alteration which changes (dst nma)
(a) Date (maturity/issue if it affects liability of partiesdoes)
(b) Sum payable, either for principal or interest
(c) Time/place of payment
(d) #/relations of parties
(e) Medium/currency in which payment is to be made
(f) Or which adds place of payment where no place of payment is specified or any other
change which alters the effect of the instrument

Metropolitan Bank and Trust Co. vs. The First National City Bank (118 SCRA 537) drawee
is L
Check; drawer: Joaquin Cunanan & company; drawee: First National City Bank(FNCB)
payee: Manila Polo Club CB: Metropolitan Bank and Trust Company; change: inc amt from 50
to 50K; change payee to cash
- A 50K check drew by Joaquin on FNCB was deposited with Metrobank by a certain
Salvador Sales
- Earlier that day, Sales had opened a current account with Metro Bank depositing 500 in
cash.
- MetroBank immediately sent the cash check to the clearing house of the central bank
with the ff words: Metrobank cleared (illegible) office all prior endorsements/ lack of
endo guaranteed
- Check was cleared the same day. Drawee FNCB (pr) paid CB Metrobank through
clearing the amount of 50K and Sales was credited with the said amt in his deposit with
Metrobank
- Sales made 1st withdrawal of P480 then 32,100 then 17, 920 and closed his account with
MetroBank
 - 9 days later, drawee FNCB returned cancelled check no 7166 to drawer Joaquin, together
with the monthly statement.
- That same day, the company notified FNCB that the check had been altered.
- The actual amount of P50.00 was raised to P50,000.00, and over the name of the payee,
Manila Polo Club, was superimposed the word CASH.
- FNCB notified Metro Bank of the alteration by telephone, confirming it the same day
with a letter, which was received by Metro Bank on the following day.
- Drawee FNCB wrote CB Metro Bank asking for reimbursement of the amount of
P50,000.00. The latter did not oblige, so that FNCB reiterated its request on. MetroBank
was adamant in its refusal.
- FNCB filed in the Court of First Instance of Manila, Branch VIII, Civil Case No. 61488
against Metro Bank for recovery of the amount of P50,000.00.
o The Respondent Court of Appeals erred in completely ignoring and disregarding
the 24-hour clearing house rule provided forunder Central Bank Circular No. 9, as
amended, although:
1. The 24-hour regulation of the Central Bank in clearing house operations is
valid and banks are subject to and are bound by thesame; and
2. The 24-hour clearing house rule applies to the present case of the petitioner and
the private respondent

W drawee FNCB or CB Metrobank is liable. DRAWEE IS LIABLE (Metro Bank cannot be

held liable for the payment of the altered check)

- The facts of this case fall within said Circular 9 s feb 17 1949. Under the procedure
prescribed, the drawee bank receiving the check for clearing from the Central Bank
Clearing House must return the check to the collecting bank within the 24-hour period if
the check is defective for any reason.
- Metro Bank invokes this 24-hour regulation of the Central Bank as its defense. FNCB on
the other hand, relies on the guarantee of all previous indorsements made by Metro Bank
which guarantee had allegedly misled FNCB into believing that the check in question
was regular and the payee's indorsements genuine; as well as on "the general rule of law
founded on equity and justice that a drawee or payor bank which in good faith pays the
amount of materially altered check to the holder thereof is entitled to recover its payment
from the said holder, even if he be an innocent holder

- The validity of the 24-hour clearing house regulation has been upheld by this Court in
Republic vs. Equitable Banking Corporation, 10 SCRA 8 (1964).As held therein, since
both parties are part of our banking system, and both are subject to the regulations of the
Central Bank, they are bound by the 24-hour clearing house rule of the Central Bank.

- In this case, the check was not returned to Metro Bank in accordance with the 24-hour
clearing house period, but was cleared by FNCB. Failure of FNCB, therefore, to call the
attention of Metro Bank to the alteration of the check in question until after the lapse of
 nine days, negates whatever right it might have had against Metro Bank in the light of the
said Central Bank Circular. Its remedy lies not against Metro Bank, but against the party
responsible for the changing the name of the payee and the amount on the face of the
check.
- Moreover, FNCB did not deny the allegation of Metro Bank that before it allowed the
withdrawal of the balance of P17,920.00 by Salvador Sales, Metro Bank withheld
payment and first verified, through its Assistant Cashier Federico Uy, the regularity and
genuineness of the check deposit from Marcelo Mirasol, Department Officer of FNCB,
because its (Metro Bank) attention was called by the fast movement of the account. Only
upon being assured that the same is not unusual' did Metro Bank allow the withdrawal of
the balance.

Republic Bank vs. CA (196 SCRA 100) drawee is L

Dividend check; drawer: SMC drawee: FBTC; payee: Delgado(made alteration) change: inc amt
CB: Rep Bank(indorser)
- SMC issued a dividend check in favor of Delgado and the check was drawn against
FBTC.
- Delgado was able to alter the check, increased the amount of the same and deposited it
with his account in Republic Bank.
- RB indorsed it with FBTC.
- The SMC notified FBTC of the alterations made and demanded for reimbursement.
- Republic Bank then didn't want to reimburse.
- The trial court held it liable.
W CB rep bank is liable. NO due to drawee’s active negligence for failing to return the forged
check to CB within 24 hours
- The 24-hour clearing rule is a valid rule applicable to commercial banks.
- It is true that when an indorsement is forged, the collecting bank or last indorser, as a
general rule, bears the loss.
- But the unqualified endorsement of the collecting bank of the checks should be read
together with the 24-hour regulation on clearing house operation.
- Thus, when a drawee bank fails to return the forged check to the collecting bank within
the 24-hour clearing rule, the collecting bank is absolved from liability.

PNB vs. CA no material alteration

Check; drawer: DECS drawee: PNB; payee: Abante Marketing (deposited with Capitol, who
deposited with PbCom) CB: PBCom(sent the check to drawee for clearing)
- DECS issued a check in favor of Abante Marketing containing a specific serial number,
drawn against PNB.
- The check was deposited by Abante in its account with Capitol City Devlp Bank and the
latter consequently deposited the same with its account with PBCOM which later
deposited it with petitioner for clearing. The check was thereafter cleared.
- However, on a relevant date, petitioner PNB returned the check on account that there had
been a material alteration on it. Subsequent debits were made but Capitol cannot debit the
 account of Abante any longer for the latter had withdrawn all the money already from the
account.
- This prompted Capitol to seek reclarification from PBCOM and demanded the
recrediting of its account. PBCOM followed suit by doing the same against PNB.
Demands unheeded, it filed an action against PBCOM and the latter filed a third-party
complaint against petitioner.

W drawee PNB can return the check to CB PBCom due to material allegation. NO should pay

- An alteration is said to be material if it alters the effect of the instrument. It means an

unauthorized change in the instrument that purports to modify in any respect the
obligation of a party or an unauthorized addition of words or numbers or other change to
an incomplete instrument relating to the obligation of the party. In other words, a material
alteration is one which changes the items which are required to be stated under Section 1
of the NIL.
- In this case, the alleged material alteration was the alteration of the serial number of the
check in issue—which is not an essential element of a negotiable instrument under
Section 1. PNB alleges that the alteration was material since it is an accepted concept that
a TCAA check by its very nature is the medium of exchange of governments,
instrumentalities and agencies. As a safety measure, every government office or agency is
assigned checks bearing different serial numbers.
- But this contention has to fail. The check’s serial number is not the sole indicia of its
origin. The name of the government agency issuing the check is clearly stated therein.
Thus, the check’s drawer is sufficiently identified, rendering redundant the referral to its
serial number.
- Therefore, there being no material alteration in the check committed, PNB could not
return the check to PBCOM. It should pay the same.

ATTY. MERCADO’S QUESTION: HOW DO YOU RECONCILE THE OPINION OF VITUG

WITH AGBAYANI’S RE: MATERIAL ALTERATION? Vitug only refers to innocent alterations
not affecting negotiability and those under Section 124 and 125

BILLS OF EXCHANGE

Sec 126. Bills of Exchange = an unconditional order in writing addressed by one person to
another, signed by the person giving it, requiring the person to whom it is addressed to pay on
demand or at a fixed or determinable future time a sum certain in money to order or to bearer

Bill of Exchange Promissory Note

order promise
No. of parties 3: drawer, drawee, payee 2: maker, payee
Liability of the one who Drawer is only secondarily Maker is primarily liable
 issues liable
If payable to issuer’s own Complete without Not complete until indorsed
order(?) indorsement
Presentment for acceptance Must be presented for No need
acceptance in certain cases
and drawee is not primarily
liable unless and until he
accepts the same +
presentment for payment
Presentment for payment if Must be presented within Must be presented for
payable on demand reasonable time from its last payment within reasonable
(if not, on maturity date) negotiation time from its issue

- When PN like BE: when note is indorsed by the payee, it becomes just like a bill
o Both the maker and acceptor are primarily liable and both the indorsee in the note
and payee in the bill are the holders
- When BE like PN: when BE has been accepted
o The acceptance is a promise to pay
o A certified check is practically a PN with the bank as the maker. It discharges
drawer from liability thereon
- BE not assignment of funds:

Types
- Draft (common term for all BE)
o Bank draft: if drawn by a bank against its branch or another bank
 Drawer and drawee bank are liable to purchaser of draft for not complying
with his instructions
 Drawee bank acting as payor bank is solely liable for acts not done in
accordance with the instructions of the drawer bank or of the purchaser of
the draft
 Drawee bank has the burden of proving that it didn’t violate
 EX.
At sight pay to the order of P, one thousand pesos (P1000) and charge
the same to the account
Of
R Bank(drawer)
By: XR (Branch manager)
To: E Bank(drawee)

- Trade acceptance
o Payable to order and at a certain maturity drawn by the seller on the purchaser of
goods and accepted by the latter by signing it as drawee (never payable on
demand)
 o States upon its face that the obligation of the acceptor arises out of purchase of
goods from the drawer
o Arises from credit obligations arising from the sale of goods and must have
definite maturity
o Concept: the sellers is both the drawer and the payee on this draft.
o Purpose: to enable the seller to raise money on it before it is due under the terms
of sale through indorsement and discount
o Same as if purchaser had given the seller his PN
o How handled:
 Seller sends with the goods or invoice filled in trade acceptance form,
often induplicate for buyer’s copy
 Buyer accepts by signing his name across it face, with date
 It is returned to seller who may hold it at maturity or discount it at bank
 Aat maturity, collected exactly as if it were a check
o EX. S sold goods to B. S draws a trade acceptance which shows as follows
Pay to the order of S, 15K only. The transaction which gives rise to this
instrument is the purchase of goods by the acceptor from the drawer. The
drawee may accept this bill payable at any bank, banker or trust company in the
Phils which such drawee may designate

S
To: B

Accepted
Payment at: BPI
Sgd B
S is both the drawer and payee. B accepts the paper by signing his name.

- Banker’s acceptance
o If drawn against a bank instead of the purchaser
o Bank is NOT making a loan; it is merely lending its credit to the buyer
o EX. ?
- Money orders
- Clean bills of exchange
- Documentary bills of exchange
- D/A bills of exchange
- D/P bills of exchange
- Time or usance bills
- Bills in set
- Inland bills
o Where both drawn and payable within the Philippines (Sec 129)
- Foreign bills
o Not drawn and not payable in Phils
 o Drawn in but not made payable in the Phils
o Not drawn but made payable in the Phil

Trust receipt
- The written or printed document signed by the

SKIP!!!!!!!!!!!!!!!!!!

Sec 127 Bill not an assignment of funds in the hands of drawee

Drawee is not liable unless and until he accepts the same
- Payee CANNOT sue a bank for dishonoring a check for non-payment
- The drawee bank must pay or accept the check before it can be liable for the instrument
- Remedy of holder: go after the parties secondarily liable, namely the drawer
- Drawer CANNOT sue the drawee based on the check when latter dishonors the check
- Other remedies: action for breach of contract
- When there are sufficient funds, the bank is bound to pay. But if the bank refuses to pay,
then there will be breach of contract

Sec 128 Bill addressed to more than one drawee

Must be jointly, if in alternative or in succession violative of this provision
- EX.
Pay to X or order 1K on Dec 25 2023
Sgd A
To: Y and Z (valid)
To: Y or Z (invalid)
To: Y or in default of Y, Z (invalid)

Sec 129 inland and foreign bills

Inland bills = both drawn and payable within the Philippines
Foreign bills = other than inland bill
GR: presumed as inland E: contrary appears on the face

Sec 130 When bill may be treated as promissory note

(1) Drawer and drawee are the same person
(2) Drawee is a fictitious person
(3) Drawee is a person not having capacity to contract
Effect: holder may treat the instrument at his option either bill or note

Sec 131 Referee in case of need = person named by the drawer or indorser as the one to whom
the holder may resort in case of need, that is, in case bill is dishonored
- Option of holder: go after
o referee icn (after protest) or
o drawer (after due proceedings on dishonor)
 - Referee is NOT bound to pay the holder BUT may be held liable to the party who named
him
- EX.
Pay to the B or order 1K dec 25 2023
In case of need apply to X
Sgd R
To: A

- If A dishonored the bill while in the hands of B (or any holder), B may apply to X for
payment but before doing so, he must first have the bill protested (Sec 167)
- But B may, if he wants to, look immediately to R, the drawer (Sec 84) after due
proceedings on dishonor have been taken by him
- Referee X is NOT under obligation to pay but he may subject himself to liability to B
depending on their agreement. If X pays, he may recover from R (or indorser who has
named him as referee in case of need)

Sec 132 Acceptance = signification by the drawee of his assent to the order of the drawer
- Requisites: WriSig NoCom
o Writing
 Rationale: sound public policy requires substantial and tangible evidence
and more reliable on in its nature
 Oral or by phone NOT valid acceptance
o Signed by the drawee
 Otherwise, not bound pursuant to Sec 18
o Not express that the drawee will perform his promise by any other means than
payment of money
 Sec 1 says payable in money only
o Communicated or delivered to the holder (drawee’s assent made know to holder)
 Incomplete until delivery or notification cuz may revoke an acceptance
before delivery and cancel the written acceptance
- How made: by writing across the face of the bill by the word, “accepted” followed by the
signature of the drawee
o “holder” “presented” “seen” “honored” “I will pay the bill” or mere signature of
drawee will constitute sufficient acceptance
- When not required:
o Checks – not presented for acceptance but presented for payment
o Payable on demand – they are essentially checks
- Effect: drawee becomes liable; bill in effect becomes a note wherein acceptor becomes
the maker and drawer becomes the 1st indorser
- Payment vs Acceptance: P is the actual performance while A is the promise to perform
an act
Sec 133 Holder entitled to acceptance on FACE of bill: holder may require that acceptance be
written on the bill and if refused, may treat it as dishonored
- Where acceptance is written
o On the bill itself
o On separate paper (Sec 134 GR does not bind acceptor E receives bill for value)
 Acceptance as to the existing bill
 Acceptance as to a non-existing bill (virtual acceptance)
 Contemplated drawee MUST describe the bill to be drawn and
promise to accept it (Sec 135 Promise to accept equivalent to
acceptance)
 MUST be drawn within reasonable time after such promise is
written
 Holder MUST take the bill upon the credit of the promise
- Holder’s right to require acceptance on bill
o Holder may require that acceptance must be written on the bill itself
o If drawee refuses, may treat the bill as dishonored and holder must give notice of
dishonor otherwise drawer & indorsers are discharged
o NOT applicable to slight bills (??)

Sec 134 Acceptance by SEPARATE instrument:

GR: does NOT bind the acceptor
E: in favor of a person to whom it is shown and who, on the faith thereof, receives the bill for
VALUE
- EX.
Pay to the order of B 100K dec 25 2023
Sgd A (drawer)
To: X (drawee)
X wrote a letter to A accepting the bill which was shown to B
- B negotiates it to C who neither saw nor knew of the letter of acceptance then negotiates
to D who saw the letter and on faith received the bill
- Can C enforce the bill against A? NO the acceptance binds X only in favor of B and D, or
those to whom it is shown and who, on faith thereof, receive the bill of value
- B and D CAN enforce the bill against X because they received the bill for value on faith
of the separate acceptance

Sec 135 Promise to accept, when equivalent to acceptance – unconditional promise in writing
before it is drawn (in favor of every person who receives for value)
- Scope: good only to persons to whom it is shown
- Before bill is drawn, B a prospective payee, wrote to X, a prospective drawee, if he
would accept A’s bill for 100k to cover goods purchased. X replied with an affirmative
- Acceptance? NO a collateral written promise to accept a bill upon a condition is not an
acceptance
Sec 136 Time allowed drawee to accept: 24 hours after presentment
- EX.
Pay to the order of B 100K, 30 days after sight
Sgd A (drawer)
To: X (drawee)
B the payee presents it for acceptance on June 5 2023 to X drawee
- X has 24 hours to accept the bill. But even if he accepts the bill on the next day (June 6),
the acceptance will date back to June 5
- Date of maturity would be July 5 (from June 5 presentment for acceptance) not July 6
(from June 6 date of acceptance)
- The time allowed begins from the time of delivery
- time for returning the bill to the holder from date of its delivery
- NOT applicable to checks cuz not presented for acceptance but for payment (which is 6
mos or 180 days)

Sec 137 Liability of drawee returning or destroying bill: within 24 hours after such delivery
or within other period, deemed to have accepted
Constructive Acceptance
(1) Where the drawee to whom the bill is delivered for acceptance destroys it
(2) Where the drawee refuses, within 24 hours after such delivery, or within such time as is
given him, to return the bill accepted or not
- In any of these, deemed accepted even if there is no actual written acceptance by him
- Drawee will be primarily liable as a constructive acceptor
- Drawee is not entitled to keep bill: it is at all times the property of the holder and holder
is entitled to have it when he wants it
o If the holder should demand its return before 24 hours, drawee is required to
comply
o Return within 24 hours unaccepted would not be a dishonor cuz drawee could still
accept by notification within 24 hours
- Secs 136 time allowed to accept and Sec 137 constructive cover both presentment for
acceptance and payment: for uniform treatment and to establish certain and predictable
results where it is not clear for which purpose the instrument was presented

Sec 138 Acceptance of incomplete bill : allowed

- When acceptance may be made
(1) Before the bill has been signed by the drawer
(2) Bill is incomplete
(3) Bill is overdue
(4) After it has been dishonored by non-acceptnace or non-payment

Sec 139 Kinds of Acceptance:

General A: assents without qualification to the order of the drawer
Qualified A: in express terms varies the effect of the bill as drawn

Sec 140 General Acceptance = to pay at a particular place UNLESS it expressly states that the
bill is to be paid there ONLY and not elsewhere

Sec 141 Qualified Acceptance: CP LTS

(a) Conditional = payment by acceptor dependent on fulfillment of condition stated
(b) Partial = acceptance to pay in part only of the amount for which the bill is drawn
(c) Local = only at a particular place
(d) Qualified as to time
(e) Acceptance of some drawees but NOT of all

- EX. CONDITIONAL
Pay to B or order 100K 10 days after sight
Sgd A (drawer)
To: X (drawee)

Accepted provided that X will pay when Y passes Nego (Sgd X)

- EX. PARTIAL
Pay to B or order 100K 10 days after sight
Sgd A (drawer)
To: X (drawee)

Accepted but only as to 50K (Sgd X)

- EX. LOCAL
Pay to B or order 100K 10 days after sight
Sgd A (drawer)
To: X (drawee)

Accepted provided that X will pay only in PSU School of Law (Sgd X)
- GR: GENERAL acceptance (Sec 140) Ex. “Accepted provided that X will pay in PSU
law”
- E: expressly states that the bill is to be paid there ONLY and not elsewhere

- EX. QUALIFIED as to TIME

Pay to B or order 100K 10 days after sight
Sgd A (drawer)
To: X (drawee)

Accepted provided that X will pay 30 days after sight (Sgd X)

- EX. NOT OF ALL

 Pay to B or order 100K 10 days after sight
Sgd A (drawer)
To: X, Y & Z (drawee)

Accepted by X & Y only (Sgd X) (Sgd Y)

Sec 142 Rights of parties as to qualified acceptance

As to Holder:
a) R to refuse a qualified acceptance
b) R to treat the bill as dishonored if drawee refuses to accept without qualification
- Drawer and indorsers engage that the bill will be paid as drawn or indorsed by them and
the effect of a qualified acceptance would be to make a contract for them without their
consent
- Effect of taking qualified acceptance: drawer and indorsers are discharged UNLESS
they assent to the qualified acceptance

PRESENTMENT FOR ACCEPTANCE

= production or exhibition of a bill of exchange to the drawee for his acceptance or payment
- Also includes presentment for payment

[Presentment for acceptance VS Presentment for payment TABLE put in both topics for
summary]

Sec 143 When presentment for acceptance must be made (exclusive) ae2
(a) When essential to fix maturity date of the instrument--Payable after sight (period after
date of presentment for acceptance)
(b) With express stipulation
(c) Payable elsewhere than at residence or place of business of the drawee

- When not necessary:

o Payable on demand (checks)
o Payable on sight
o Payable at a day certain or fixed time at fixed date
o Other event which does not fall under b and c
- However, it is of the holder’s interest that the bill should be accepted, as only by
accepting it does the drawee become bound to pay it and until such acceptance, the holder
has for his debtor only the drawer

Sec 144 When failure to present releases drawer and indorser: if required to present or
negotiate it within reasonable time
- GR: presentment for PAYMENT not required aside from 3 exclusive instances under 143
- Necessary to charge persons secondarily liable
 - EX. PAYABLE AFTER SIGHT
Pay to B or order 100K 10 days after sight
Sgd A (drawer)
To: X (drawee)

- EX. EXPRESS STIPULATION

Pay to B or order 100K on Dec 25 2023 provided that there is presentment for acceptance to X
Sgd A (drawer)
To: X (drawee)

- EX. DRAWN ELSEWHERE

Pay to B or order 100K on Dec 25 2023 at BPI, San Jose PPC
Sgd A (drawer)
To: X, Manila (drawee)
- Bill must be presented for acceptance in order to inform drawee X of the existence of the
bill so that he can make arrangements for its payment at BPI

Sec 145 Presentment, how made hr bb e

(a) By or on behalf of holder
(b) @reasonable hour
(c) on a business day
(d) before overdue
(e) to the drawee or some person authorized to accept or refuse acceptance on his behalf
(i) IF 2 or more, not partners: to BOTH/ALL unless one has authority for all
(ii) IF drawee is dead: to his personal representatives or not present (presentment is
excised; “may”)
(iii) IF drawee is bankrupt or insolvent: to creditors or to his trustees or assignee

Presentment for acceptance Presentment for payment

Place of presentment is NOT material since Sec 72 MUST be presented at a proper place:
drawee need only write his acceptance on the Sec 73: order of preference
bill if he wishes to accept 1. where specified
2. address of maker/acceptor
3. usual place of business or residence
4. where m/a can be found or at last
known place of b/r

- Time for making presentment for acceptance

o Before overdue
o Within reasonable time after acquisition
- To whom:
o GR: to drawee or authorized person on his behalf
o IF 2 or more drawees: BOTH
 UNLESS one of them is authorized
 o IF dead drawee: to his personal representatives or not present (presentment is
excised; “may”)
o IF drawee is bankrupt or insolvent: to creditors or to his trustees or assignee

Sec 146 On what days presentment may be made: any day which may be presented for
payment unders Secs 72 & 85; if Saturday not holiday, may be made before 12 noon on that day

Sec 72 Sufficient presentment, if made:

a) By holder or person authorized to receive payment (who presents)
b) At reasonable hour on business day (when)
c) At proper place (where)
d) To person primarily liable OR if absent, any person found at the place where presentment
was made (to whom presented)
- Cannot be made on Sunday or holiday
Sec 85 Time of maturity
- Time fixed
- If on Sunday/holiday/Saturday, next succeeding business day
o Except: if on demand, at the option of holder, MAY be presented before 12 noon
on Saturday when it is not holiday

Presentment for acceptance Presentment for payment

IF SATURDAY, may be presented before IF SATURDAY may be presented before
12nn when not a holiday, no qualification 12nn when not a holiday provided that it
is PAYABLE ON DEMAND at the option
of holder,

Sec 147 Presentment where time is insufficient: delay of presentment is caused by presenting
the bill for acceptance at a place other than the place where the bill is drawn payable (Sec 81
when delay is excused: beyond control; not imputable to his d/m/n)
- EX.
Pay to B or order 100K on June 7 2023 at PSU Law School
Sgd A
To: X, Ontario, Canada
- Under Sec 143(c) B must present the bill for acceptance to X in Canada and under Sec 71
B must also present the bill for payment at PSU Law School
- If the bill has been delivered to B on June 5 2023, B will have no more time , despite
exercise of reasonable diligence to present it for payment on June 7 I PSU Law after
presenting it for acceptance to X in Canada
- Such delay is excused and does not discharge the drawer and indorsers from their
liabilities
Sec 148 Where presentment for acceptance is excused:
(a) Drawee is dead/absconded/fictitious/no capacity to contract
(b) After exercise of reasonable diligence, presentment cannot be made
(c) Acceptance refused on some other ground

Presentment for acceptance Sec 148 Presentment for payment Sec 82

(1) Drawee is (1) After exercise of reasonable
dead/absconded/fictitious/no capacity diligence(active search& make
to contract inquiries of payee when neither maker
(2) After exercise of reasonable diligence, nor his residence can be found),
presentment cannot be made cannot be made
(3) Acceptance refused on some other (2) Drawee is a fictitious person
ground (3) Waiver of presentment

Sec 149 When dishonored by nonacceptance

(a) Presented then refused or cannot be obtained; or
(b) Excused then not accepted

Sec 150 Duty of holder where bill is not accepted: such holder presenting MUST treat the bill as
dishonored by nonacceptance
Otherwise, he loses the right of recourse against drawer and indorsers (latter discharged)

Sec 151 Rights of holder where bill is not accepted:

(a) immediate R of recourse against drawer and indorsers;
(b) R to not be required of presentment for payment
- UNLESS after previous nonacceptance, bill is subsequently accepted, presentment for
payment is necessary
- UNLESS accepted for honor, to charge acceptor for honor, presentment for payment is
also necessary
- After giving notice of dishonor and protesting when required, can IMMEDIATELY file
an action against the parties secondarily liable on the bill. Even when payable at fixed
and date of maturity hasn’t yet arrived. Holder need not wait for that day to arrive

PROTEST
= a formal statement in writing made by a notary under his seal of office at the request of the
holder of a bill or note, in which it is declared that the same was on a certain day presented for
payment was refused, whereupon the notary protests against all parties to such instrument and
declares that they will be held responsible for all loss or damage arising from its dishonor

Sec 152 In what cases protest necessary: foreign bills; effect of non-protest: discharged
- Protest is required when:
o Foreign bill is dishonored by nonacceptance
 o Foreign bill is dishonored by nonpayment, it not having been previously
dishonored by nonacceptance
o Bill has been accepted for honor, it must be protested for non-payment before it is
presented for payment to the acceptor for honor
o Where the bill contains a referee in case of need, it must be protested for non-
payment before it is presented for payment to the referee in case of need
- MUST be made on the SAME date of dishonor, by a notary; or respectable citizen of the
place in the presence of 2 credible witnesses so recourse to secondary parties
- Inland bills
o Where both drawn and payable within the Philippines (Sec 129)
- Foreign bills
o Not drawn and not payable in Phils
o Drawn in but not made payable in the Phils
o Not drawn but made payable in the Phil

Sec 153 Protest, how made:

(a) by annexing the protest to the bill or must contain a copy
(b) then cause it to be under the hand and seal of the notary specifying the ff:
o time and place of presentment
o fact that presentment was made and the manner
o cause and reason for protest
o demand made and answer given, if any or the fact that drawee or acceptor cannot
be found
Procedure
- instrument is presented for payment
- payment is refused
- instrument taken by notary public to the party and party may state that he refuses to pay it
- notary makes statement to that effect and attaches a seal that it has been dishonored and
that he protested it for nonpayment
- notary keeps this or he may send his sworn statement, one copy to one person and one to
the other
- this is NOT notice of protest
- protest is a solemn declaration made by notary that paper has been dishonored

INCOMPLETE SEC 153

Sec 154 Protest, by whom made:

(a) notary public; or
(b) any respectable resident of the place where the bill is dishonored, in the presence of 2 or
more credible witnesses
 - Why necessary for foreign bills: from the needs of the case, the intervention of a
universally recognized authority is called for
- If notary public cannot be obtained: may be made by any respectable resident

Sec 155 Protest, when made: ON the day of dishonor UNLESS delay is excused
- GR: Protest on the day of dishonor
- E: delay is excused
o Sec 113 When delay is caused by circumstances beyond the control of holder and
not imputable to his default, misconduct or negligence
- Duly noted: where notary public jots down a note on the bill, or a paper attached thereto,
or in his registry book, consisting of his initials or signature and those matters required to
be stated in Sec 153
o Sec 153 Protest, how made:
 by annexing the protest to the bill or must contain a copy
 then cause it to be under the hand and seal of the notary specifying the ff:
 time and place of presentment
 fact that presentment was made and the manner
 cause and reason for protest
 demand made and answer given, if any or the fact that drawee or
acceptor cannot be found
- If DULY NOTED: may be extended as of the day of the noting (noting must be made on
the day of dishonor but it may be extended into a formal protest afterwards)
- EX. Bill dishonored on June 12 2023. NO NEED to be protested on the same date but it
must be at least be “duly noted”. If the formal protest is made subsequently, it effect
retroact to the day of the noting. But the notice

Sec 156 Protest, where made

GR: place where it is dishonored
E: when drawn payable at the place of business or residence of some person other than drawee
has been dishonored by nonacceptance—place where it is expressed to be payable
- EX.
Pay to B or order 100K on dec 25 2023 at PSU Law School
Sgd A (drawer)
To: X (drawee)
X lives in Ontario, Canada, but the bill is payable at Palawan
B-C-D-E-F(holder)
- The bill is presented for acceptance by B to X in Canada
- IF X refused: on its maturity, the bill is presented for payment at PSu Law School.
Payment is refused
- F must protest the bill for non-payment in PSU Law School and no further presentment
for payment to, or demand on, the drawee X is necessary

Sec 157 Protest both for nonacceptance and nonpayment

 - Protest for nonpayment is optional after protest for nonacceptance
- Under sec 151 after bill is dishonored by nonacceptance presentment for payment is not
necessary

Sec 158 Protest before maturity where acceptor insolvent

- Protest for better security before maturity: one made by the holder against the drawer and
indorsers where the acceptor has been adjudged bankrupt or insolvent or has made an
assignment for the benefit of creditors before the bill matures
- Not necessary to charge drawer or indorser
- Optional on the part of holder
- When made:
o After acceptance
o But before date of maturity
o When acceptor has been adjudged b/i/a
- Rationale: drawee wont be able to pay, such protest is to give notice to drawer or
indorsers of this fact in order to enable for them to make necessary arrangements so that
the will not be held liable and prevent loss of re exchange

Sec 159 When protest dispensed with: any circumstances which would dispense with notice of
dishonor
- Sec 109 waiver of notice before time of giving notice/ after omission to give notice
- Sec 110 Whom affected by waiver: all parties unless written above sgd of indorser
- Sec 111 waiver of protest deemed to onclude formal protest + presentment +notice of d
- Sec 112 when notice is dispensed: after exercise of reason diligence; notice cannot be
given or does not reach parties sought to be charged
- Sec 113 delay in giving notice, when excused: beyond control and not imputable to his
dmn
- Sec 114 When notice need not be given to drawer: R and E same; E ficitious; R to whom
presented for payment; R no right to expect’ R countermanded payment
- Sec 115 When notice need not be given to indorser: E fictitious and I is aware; I person to
whom presented for payment; made or accepted for accommodation of I
- Sec 116 Notice of non payment where acceptance refused notice of subsequent dishonor
by non payment not necessary unless accepted
- Sec 117 Effect of omission to give notice of non acceptance; not prejudice rights of HDC
subsequent to omission
- Sec 118 protest necessary only to foreign bills

Sec 160 Protest where bill is lost/destroyed/wrongly detained from person entitled to hold it:
protest may be made on a copy or written particulars

Sec 161 Acceptance for honor = an acceptance by a stranger before maturity, where drawee has
refused to accept and the bill has been protested for non acceptance or where protested for better
security
 - Bill is not overdue at the time of acceptance for honor
- Acceptor of honor must be a stranger
- Holder must give his consent
- Purpose: to save credit of the parties to the instrument

Sec 162 Acceptance for honor, how made: in writing; indicate such; signed by acceptor for honor
- Must appear before notary

Sec 163 When deemed to be an acceptance for honor of the DRAWER: when does not expressly
state for whose honor it is made

Sec 164 Liability of the acceptor for honor: to the holder + all parties subsequent to party whose
honor he has accepted

Sec 165 Agreement of acceptor for honor: acceptor engages that he will, on due presentment, pay
accdg to terms of his acceptance PROVIDED that is shall have been duly presented for payment
& protested for non payment and notice of d given to him
- EX. A drawer B payee and X drawee; C-D-E-F. X drawee at maturity refuses to accept
the bill and F protests it. Before date of maturity, Y, a stranger accepts for the honor of C
- Y is liable to F and to D&E, parties subsequent to C, the party whose honor Y accepted
the bill
- Contract of acceoptor of honor: secondary (not primary nor absolute) where acceptor of
honors agrees to pay IF presentment for payment has been made; drawee doesn’t pay; bill
is protested for non payment; notice of dishonor is given to him

Sec 166 Maturity of bill payable after sight; accepted for honor: maturity is clarculated from the
date of noting for non acceptance (not from acceptance for honor)

Sec 167 Protest of bill accepted for honor/protest/referee in case of need MUST be protested for
nonpayment before preented for payment to acceoptor for honor/referee

Sec 168 Presentment for payment to acceptor for honor, how made
(1) IF presented where protest for non payment is made, must be not later than the day ff its
maturity
(2) IF some other place, must be forwarded within the time specified in Sec 104
Sec 104 Where parties reside in different places
IF sent by mail: deposited in the post office in time to go by mail the day following the
day of dishonor
IF no mail at a convenient hourL by next mail thereafter
IF given other than through post office: within the time that notice would have been
received in due course of mail

Sec 169 When delay in making presentment is excused for acceptor in honor/referee
Sec 81 When delay in making presentment is excused
Caused by circumstances BEYOND the control of the holder and not imputable to his
default, misconduct or negligence. (dmn)

Sec 170 Dishonor of bill by acceptor for honor: must e protested for non payment by
acceptor for honor ( in order to fix the liab of the indorsers)

PAYMENT FOR HONOR

Sec 171 Who may make payment for honor: any person

Sec 172 Payment for honor, how made: attested by notarial act of honor which may be
appended to the protest or form an extension to it

Sec 173 Declaration before payment for honor: must be founded on a decaration made by
the payer for honor or by his agent declaring his intention to pay for honor and for whose
honor he pays

Sec 174 Preference of parties offering to pay for honor: IF 2 or more persoms offer to pay
for honor of different parties, person whose payment will discharge most parties will be
preferred
- EX.
Pay to B or order 100K on dec 25 2023 at PSU Law School
Sgd A (drawer)
To: X (drawee)
- B-C-D-E-F; X refuses to pay; F has duly protested for non-payment;
- EX. IF Z offers to pay the honor of B, he is preferred as Z’s payment for the honor
of B will discharge C, D and E while Y’s payment for honor of C would only
discharge D & E

Sec 175 Effect on subsequent parties where bill is paid for honor: discharged BUT payer
the payer for honor is subrogated for, and succeeds to both rights and duties f the holder
as regards the party for whose honor he pays and parties liable to the latter

EX.
Pay to B or order 100K on dec 25 2023 at PSU Law School
Sgd A (drawer)
To: X (drawee)
B-C-D-E-F; X refuses to pay; F has duly protested for non-payment;
Y pays for honor of C
- D & E, being subsequent to C, whose honor the payment is made are discharged
 - Y acquires the rights of F, as against C, A B and X, parties who are liabke to C but
the payor for honor shall notify within reasonable time, the party for whose honor
he pays
- Otherwise, the party is not bound for refund

Sec 176 Where holder refuses to receive payment supra protest: holder lolses his right of
recourse against any party who would have been discharged by such payment

Sec 177 Rights of payer for honor (upon payment of bill & notarial expenses) entitled to receive
both the bill itself and the protest (+ rights of holder under sec 175)

BILLS IN SET
- drawn in several parts, each part being numbered and containing a reference to the other parts,
the whole of parts constituting just one bill

Sec 178 Bills in set constitute one bill

Sec 179 Rights of holder where different parts are negotiated: If negotiated to different HDCs,
the holder whose title first accrues is, the true owner of the bill (does not affect right of person
who in due course, accepts or pays parts first presented to him
- EX. B, payee, wants to raise P4000. In violation of his rights, he negotiates the first part
of the bill to C and the second part to D, both of whom are holders in due course. Who is
the true owner of the bill?
- If B negotiates to C on September 25 and to D on September 27, C is the true owner, as
C’s title accrues first.
- But if D succeeds in presenting his part of the bill for acceptance for payment and X the
drawee, accepts or pays the second part in due course, X is protected and X can refuse to
accept C’s part of the bill.

Sec 180 Liability of holder who indorses 2 or more parts of a set to different persons: holder is
liable on every such part and every indorser subsequent to him is liable on the part he has himself
indorsed, as if separate
- B is liable on both parts as if there are two bills, on the first to C and on the second to D
- In other words, as a result of his negotiation of the 2 parts, B is liable for a total of P4000
- But A, the drawer, or X, the drawee, is liable only on one part or for P2000 unless the
drawee accepts both parts
- Suppose that C and D respectively negotiate the parts they have to E, the first part, and F,
the second part. C is liable to E for the part he endorsed to E and D is liable to F for the
part he indorsed to F.

Sec 181 Acceptance of bill drawn in sets: acceptance may be written in any part but must be in
one part only; otherwise he will be liable on every such part as if separate bill
 - The drawee X must accept only one part
- But if he accepts both parts and they are negotiated to holders in due course, he is liable
on every such part as if it were a separate bill, that is, for a total of P4000
- But he can ask for reimbursement from A, drawer, on only one part, that is P2000,
because the order of the drawer to him is to pay only one part, not both parts

Sec 182 Payment by acceptor of bills drawn in sets: if pays without requiring the part bearing his
acceptance to be delivered to him and the part at maturity is outstanding in hands of HDC, he is
liable to the holder
- Suppose that X accepts only the first part. Then he pays the second part without requiring
the return of the first part.
- On the date of maturity, X would still be liable to the holder of the first part on which it
appears his acceptance

Sec 183 Effect of discharging one of a set

GR: whole bill is discharged
E: otherwise provided (Sec 180, 181, 182)

Summary of bills in set:

If #1 and #2 were both negotiated
Who has better right? One who has earned the title! One who earlier been accepted
If both was dishonored, both sent notice? One who has a better title
If both were accepted? Liable for both; acceptor can recover from one who caused the two bills
to be treated as two instead of one