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NEGOTIABLE INSTRUMENT

FEATURES OF NEGOTIABLE INSTRUMENT

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TWO FEATURES OF NEGOTIABLE INSTRUMENTS NEGOTIABILITY ACCUMULATION OF SECONDARY CONTRACTS AS THEY ARE TRANSFERRED FROM ONE PERSON TO ANOTHER.
THE FUNCTIONS OF NEGOTIABLE INSTRUMENTS ARE – 1.IT ACTS AS SUBSTITUTE FOR MONEY – 2. IT INCREASES THE PURCHASING MEDIUM IN CIRCULATION – 3. IT IS INTENDED, LIKE MONEY, TO HAVE A DEFINITE VALUE – 4.IT SERVES AS AN EQUIVALENT OF MONEY – 5. IT IS NOT LEGAL TENDER

REQUISITES OF NEGOTIABILITY

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It must be in writing and signed by the maker or drawer It must contain an unconditional promise or order to pay a sum certain in money It must be payable on demand, or at a fixed or determinable future time It must be payable to order or to bearer Where the instrument is addressed to a drawee, he must be named or otherwise indicated therein with reasonable certainty
Requisite for a negotiable note- 1 to 4 Requisite for a negotiable bill - 1 to 5

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I promise to pay B or order the sum of P1. with a provision that. . whether at a fixed rate. or at the current rate. With interest. the whole shall become due.With cost of collection or an attorney’s fee. or – 4.000. in case payment shall not be made at maturity.What constitute certainty as to sum? • The sum payable is a sum certain in money within the meaning the NIL. 30 days from this date. or – 5.00 with interest. although it is paid-– 1. By stated installments.With exchange.By stated installments. the whole account becomes automatically due and payable. or in case of default of any of the installment due. upon default in payment of any installment or of interest. or – 3. Ex. or – 2.(or at 6 monthly installment plus 25% attorney’s fee.

– Ex. .00 In payment for a horse I bought from him the other day. the note is non-negotiable But an order or promise to pay out of a particular fund is not unconditional.I promise to pay B or order P1000.An indication of a particular fund out of which reimbursement is to be made or a particular account to be debited with the amount. though coupled with– 1. Pay B or order P100.”A”.00 and reimburse yourself out of my money in your hands.00 out of my part of the estate (out of my salary or out of the proceeds of my loan) signed. Signed (B) – But if the promise is subject to the terms of the transaction stated.When promise is unconditional? • An unqualified order or promise to pay is unconditional within the meaning of the NIL. Signed (A) – 2. Pay to B or order P100. A statement of the transaction which gives rise to the instrument. then. – Ex. Ex.

WHAT CONSTITUTE? • An instrument is payable at a determinable future time. which is expressed to be payable– 1.DETERMINABLE FUTURE TIME. though the time of happening be uncertain.On the death of A or 10 days after death of A An instrument payable upon a contingency is not negotiable. 60 days after sight or after date – 2. – Ex. Ex. At a fixed period after date or sight – Ex. and the Happening of the event does not cure the defect. .On or at a fixed period after the occurrence of a specified event which is certain to happen.I promise to pay B or Order P100 after B passes the Bar examination.On or before a fixed or determinable future time specified therein – 3.

– 3. .authorizes confession of judgment if the instrument be not paid at maturity – -confession of judgment is void under Philippine jurisdiction but does not affect negotiability. at the option of the holder. – The test of negotiability is whether or not the promise would give rise to a cause of action for breach of contract if the additional act is not done.Provisions Not Affecting Negotiability • • General Rule-An instrument which contains an order or promise to do any act in addition to the payment of money is not negotiable. – 2.Waives the benefit of any law intended for the advantage or protection of the obligor. Ex.waiver of presentment or protest – 4.Gives the holder an election to require something to be done in lieu of payment of money. Exceptions: – 1.Ex. It is void because bargains away a right to a day in court.Authorizes the sale of collateral securities in case the instrument be not paid at maturity.Pay to B or order P100 or 10 cavans of palay.

SEAL.designates a particular kind of current money in which payment is to be made . Particular Money • The validity and negotiable character of an instrument are not affected by the fact that– 1.OMISSION.Does not specify the value give or that any value had been given therefor – 3. Bears a seal – 5.Does not specify the place where it is drawn or the place where it is payable – 4.It is not dated – 2.

holder of an office.2) In which no time for payment is expressed. or endorsed when overdue. it is. An instrument is payable to Order. accepted.one or some of several payees. as regards the person so issuing. or presentation. It may be payable to the order of two or more payees. accepting or endorsing it. – -Where an instrument is issued.when it so expressed to be payable on demand. and payable to Bearer? • An instrument is payable on demand– 1. payable on demand. or at sight.The instrument is payable to order Where it is drawn payable to the order of a specified person or to him Or his order.When Instrument payable on demand. payable to Order.etc .

Fictitious person-mean to be a person who has no right to the instrument because the drawer or the maker of it so intended. When the name of the payee does not purport to be the named of any person. it does not matter whether the name of the payee used by the drawer or maker be that of one living or dead or one who never existed. Pay to cash When the only or last endorsement is an endorsement in blank. or when it is payable to a fictitious or non-existing person and such fact is known to the person making it so payable.it is expressed to be so payable or.Payable to Bearer • • • • The instrument is payable to bearer when. . when it is payable to person named therein or bearer. and therefore. Ex.

the note is discharge. Issue 2.LIFE OF A NEGOTIABLE INSTRUMENT • The incidents in the life of the Negotiable Instrument are: – – – – – – – 1. . B negotiates the note to C. then. Acceptance/dishonor by non-acceptance 5. Presentment for acceptance in certain kinds of bill of exchange 4.Negotiation 3. C presents it for payment to A( may either accept and pays or dishonor it. it he pays.Discharge Example: A-issue a note in favor of B.Presentment for payment/dishonor by non-payment 6.Notice of dishonor/Protest in certain cases 7.

. – Assignment is the method of transferring a non-negotiable instrument whereby the assignee is merely placed in the position of the assignor and acquires the instrument subject to all defenses that might have been set up against the original payee. it is negotiated by delivery – -if payable to order.Negotiation • What constitute negotiation? – An instrument is negotiated when it is transferred from one person to another in such a manner as to constitute the transferee the holder thereof. it is negotiated by the endorsement of the holder completed by delivery. – -If payable to bearer.

Kinds of endorsement: – – – 1. The signature of the endorser.ENDORSEMENT • • • The endorsement must be written on the instrument itself or upon a paper attached thereto. . does not operate as a negotiation of the instrument. or which purports to transfer the instrument to two or more endorsees severally. But where the instrument has been paid in part. 2.An endorsement in blank-specifies no endorsee and an instrument is payable to bearer and may be negotiated by delivery. it may be endorsed as to the residue. without additional words. is a sufficient endorsement. A blank endorsement may be converted into a special endorsement by writing over the signature of the endorser in blank any contract consistent with the character of the endorsement. An endorsement which purports to transfer to the endorsee a part of the amount payable. A Special endorsement. The endorsement must be of the entire instrument.specifies the person to whom or to whose order the instrument is to be payable and the endorsement of such endorsee is necessary to the further endorsement.

constitute the endorsee the agent of the endorser.Pay to C for deposit sgd. Pay to C only.A is the maker of the note payable to B or his order for P1000.Ex. But all subsequent endorsees acquire only the title of the first endorsee under the restrictive endorsement.. Effect of restrictive endorsement. . The endorsement passes the legal title over the note to C so as to enable C to demand payment for P1.Restrictive Endorsement • • • • An endorsement is restrictive which either-prohibits the further negotiation of the instrument. Ex. Pay to C for deposit only or for collection only. Vest the title in the endorsee in trust for or to the use of some other persons. b) to bring an action thereon that the endorser could bring. Ex. the maker. c) to transfer his rights as such endorsee. It is endorsed by B. Ex. Pay to C in trust for B.000.00 and receive payment of the value of the note from A.B. where the form of the endorsement authorizes him to do so.a restrictive endorsement confers upon the endorsee the right-a) to receive payment of the instrument.

A makes a note payable to B or his order. C. Such endorsement does not impair the negotiable character of the instrument. that is. . at endorsee’s risk. Ex. lack of capacity to endorse on the part of prior parties. then. can recover from B. It may be made by adding to the endorser’s signature the words “without recourse” or any words of similar import. The qualified endorser is not entirely free from secondary liability. he is liable if the instrument is dishonored by non-acceptance or non-payment due to forgery. lack of good title on the part of the endorser. B endorses the note to C sans recourse. Ex. If C cannot compel A to pay the note because A’s signature is forged. Pay to C. Without recourse means without resort to a person who is secondarily liable after the default of the person who is primarily liable.QUALIFIED ENDORSEMENT • • • • • A qualified endorsement constitute the endorser a mere assignor of the title to the instrument. He is secondarily liable on his warranties as an endorser under section 65.

It is endorsed as follows>Pay to C. maker. can disregard the condition and pay C. A Conditional endorsement does not render an instrument non-negotiable. maker and B. the condition renders it non-negotiable as the promise or order therein would not be unconditional. or the proceeds thereof. payee. subject to the rights of the person endorsing conditionally. . Suppose a note of P100 with A. But if the condition is on the face of the instrument. if he passes the bar. the party required to pay the instrument may disregard the condition and make payment to the endorsee or his transferee whether the condition has been fulfilled or not. But if A pays. Ex. making the order or promise to pay conditional.CONDITIONAL ENDORSEMENT • • • Where an endorsement is conditional. C. But any person to whom an instrument so endorsed is negotiated will hold the same. But A may also refuse to pay on the ground of non-fulfillment of the condition. C will hold the proceeds subject to the condition or rights of B as endorser. does not immediately acquires ownership over the sum. A. Such payment will discharge the note. in this case.

he may endorse the instrument as therein described adding. and may be negotiated by either the endorsement of the bank or corporation or the endorsement of the officer. Where an instrument is negotiated back to a prior party.Endorsement-Notes • • • • • • • Where an instrument. . Where an instrument is payable to the order of two or more payees or endorsees who are not partners. but the person endorsing specially is liable as endorser to only such holders as making title through his endorsement. and all endorsers subsequent to him. The endorser whose endorsement is struck out. such party may. payable to bearer is endorsed specially. subject to the provisions of this act reissue and further negotiates the same. Where an instrument is drawn or endorsed to a person as “cashier” or other fiscal officer of a bank or corporation. The holder may at any time strike out endorsement which is not necessary to his title. it may nevertheless be further negotiated by delivery. are thereby relieved from liability on the instrument. But he is not entitled to enforce payment thereof against any intervening party whom he was personally liable. it is deemed prima facie to be payable to the bank or corporation of which he is such officer. An instrument negotiable in its origin continues to be negotiable until it has been restrictively endorsed or discharged by payment of otherwise. Where the name of a payee or endorsee is wrongly designated or misspelled. if he thinks fit his proper signature. all must endorse unless the one endorsing has authority to endorse for the others.

CONSIDERATION • • • • Every negotiable instrument is deemed prima facie to have been issued for a valuable consideration.00 to C.00 and to that extent. An antecedent or pre-existing debt constitute value. A makes a note payable to B for P1. B owes C P600. Can C collect from A the whole amount of P1.000. and every person whose signature appears thereon to have become a party thereto for value. he is a holder for value. he is deemed a holder for value to the extent of his lien. C is said to have a lien on the note to the extent of P600. One who gives valuable consideration for an instrument issued or negotiated to him is a holder for value.000. Where the holder has a lien on the instrument arising either from contract or by implication of law. Ex.00. B endorses the note to C to secure the payment of his debt of P600.00.00? • . Value is any consideration sufficient to support a simple contract.

Suppose there is want or failure of consideration to the extent of P600. while failure of consideration implies that the giving of valuable consideration was contemplated but that it failed to pass.000. Failure of consideration. These defenses are personal. How much can C collect from A? • • • • • . Want or absence of consideration embraces transactions where no consideration was intended to pass. Where A issues a check to B in payment of forged certificates of stock.Continuation • Absence or failure of consideration is a matter of defense as against any holder not a holder in due course. In the illustration above.Ex. if the certificate of stocks are not forged but B fails to deliver the stocks. Partial failure of consideration:Ex. partial failure of consideration is a defense pro tanto. Absence of consideration.00 only. A issues a note to B for P1. Absence or failure of consideration is a matter of defense against persons not a holder in due course.Ex.00. The note was endorse to C. which are therefore valueless. whether the failure is an ascertained and liquidated amount or otherwise.

means “without receiving value by virtue of the instrument”. drawer. or endorser. lender. A delivered the money to B. as used in sec. and took the note in his own name. at the time of taking the instrument. as payee.Accommodation Party • • • • • • An accommodation party is one who signed the instrument as maker. acceptor. borrower. without receiving value therefor. . Is A an accommodation party or not? (SEE CASE OF MAULINI VS SERRANO. and for the purpose of lending his name to some other person. and not. a broker facilitated a loan in favor of B. Ex. that is. A delivered the note to C. A. B issued the note in favor of A. and endorsed the note upon the request of C because he does not want his name to appear in the books of the borrower as a lender. knew him to be only an accommodation party. as it apparently is supposed to mean without receiving payment for lending his name. 28 PHIL 640) -the phrase “without receiving value therefor. Such person is liable on the instrument to a holder for value notwithstanding such holder. 42 Phil 384) The accommodation party acts as surety.” ( Clark vs Sellner. 29.

Where an instrument payable on demand is negotiated for an unreasonable length of time after its issue. 3) that he took it in good faith and for value. Where the transferee receives notice of any infirmity in the instrument or defect in the title of the person negotiating the same before he has been paid the full amount agreed to be paid therefor. discharges the instrument. and payment to him in due course.RIGHTS OF A HOLDER • • • The Holder of a negotiable instrument may sue thereon in his own name. 4) that at the time it was negotiated to him he had no notice of any infirmity in the instrument or defect in the title of the person negotiating it. What constitute a Holder in due course? A holder in due course is a holder who has taken the instrument under the following conditions: 1) that it is complete and regular on its face. 2) that he became a holder of it before it was overdue and without notice that it had been previously dishonored. if such was the fact. • • . the holder is not deemed a holder in due course. he will be deemed a holder in due course only to the extent of the amount theretofore paid by him.

What constitute notice of defect?-To constitute notice of defect or an infirmity in the instrument. But a holder who derives his title thru a holder in due course. or force and fear. or for an illegal consideration. and may enforce payment of the instrument for the full amount thereof against all parties liable thereon. and free from defenses available to prior parties among themselves. a negotiable instrument is subject to the same defenses as if it were non-negotiable. and who is not himself a party to any fraud or illegality affecting the instrument.Continuation-Holder • • • • • • When title defective? The title of a person who negotiates an instrument is defective when he obtained the instrument. Every holder is deemed prima facie to be a holder in due course. has all the rights of such former holder in respect of all parties prior to the latter. by fraud. the person to whom it is negotiated must have had actual knowledge of the infirmity or defect. or other unlawful means. or knowledge of such facts that his action in taking the instrument amounted to bad faith. A holder in due course holds the instrument free from any defect of title of prior parties. or under such circumstances as amount to a fraud. duress. In the hands of any holder other than a holder in due course. . or any signature thereto. or when he negotiates it in breach o faith.

or both. he will pay the amount thereof to the holder.LIABILITIES OF PARTIES • • • The Maker of a negotiable instrument by making it engages that he will pay it according to its tenor. But the drawer may insert in the instrument an express stipulation negativing or limiting his own liability to the holder. The acceptor by accepting the instrument engages that he will pay it according to the tenor of his acceptance and admits the existence of the drawer. according to its tenor. . and admits the existence of the payee and is then capacity to endorse. and the necessary proceedings on dishonor be duly taken. and engages that on due presentment the instrument will be accepted or paid. and that if it be dishonored. and the existence of the payee and his then capacity to endorse. The drawer by drawing the instrument admits the existence of the payee and his then capacity to endorse. and his capacity and authority to draw the instrument. or to any subsequent endorser who may be compelled to pay it. the genuineness of his signature.

the warranty extends in favor of no holder other than the immediate transferee. not otherwise a party to an instrument. . DRAWER. OR ACCEPTOR IS DEEMED TO BE AN ENDORSER. he is liable to all parties subsequent to the maker or drawer. 3) if he signs for the accommodation of the payee. (sec. he is liable to the payee and to all subsequent parties. He is liable as endorser in accordance with the following rules: 1)if the instrument is payable to the order of a third person. he is liable to all parties subsequent to the payee.ENDORSER • • • A PERSON PLACING HIS SIGNATURE UPON AN INSTRUMENT OTHERWISE THAN AS MAKER. Every person negotiating by delivery or qualified endorsement warrants that: 1)the instrument is genuine and in all respects what it purports to be. UNLESS HE CLEARLY INDICATES BY APPROPRIATE WORDS HIS INTENTION TO BE BOUND IN SOME OTHER CAPACITY. or is payable to bearer. 2) if the instrument is payable to the order of the maker or drawer. But when the negotiation is by delivery only. 2) that he has good title to it: 3)that all prior parties had capacity to contract.is a person. places thereon his signature in blank before delivery. 4) that he has no knowledge of any fact which would impair the validity of the instrument or render it valueless.65) Irregular Endorser.

endorsers are liable prima facie in the order in which they endorse. he incurs all the liabilities prescribed by section 65. Where a person places his endorsement on an instrument negotiable by delivery he incurs all the liabilities of an endorser. and the fact that he is acting only as agent.b. it shall be accepted or paid. and c of sec. and. in addition.65. and the necessary proceedings on dishonor be duly taken. 2) that the instrument is at the time of his endorsement valid and subsisting. Joint payees or joint endorsees who endorse are deemed to endorse jointly and severally. warrants to all subsequent holders in due course: 1)the matters or things mentioned in subdivisions a.Continuation-Endorser • • • • Liability of General Endorser-Every endorser who endorses without qualification. Where a broker or other agent negotiates an instrument without endorsement. unless he discloses the name of his principal. and that if it be dishonored. but evidence is admissible to show that as between or among themselves they have agreed otherwise. according to its tenor. . as the case may be. As respect one another. he engages that on due presentment. he will pay the amount thereof to the holder. or both. or to any subsequent endorser who may be compelled to pay it.

A signature on a blank paper delivered by a person making the signature in order that the paper may be converted into a negotiable instrument operates as a prima facie authority to fill it up as such for any amount. 14 Blank Instrument • • • • Where the instrument is wanting in any material particular. But if any such instrument.Sec. it is valid and effectual for all purposes in his hands. however. it must be filled strictly in accordance with the authority given and within reasonable time. is negotiated to a holder in due course. the person in possession thereof has prima facie authority to complete it by filling up the blanks therein. In order. that any such instrument. when completed. may be enforced against any person who became a party thereto prior to its completion. and he may enforce it as if it had been filled up strictly in accordance with the authority given and within a reasonable time. . after completion.

and as regards remote party other than a holder in due course.Sec. But where the instrument is in the hands of a holder in due course. a valid delivery thereof is conclusively presumed. and in such case the delivery may be shown to have been conditional. as against any person whose signature was placed thereon before delivery. as the case may be. As between immediate parties.Every contract on a negotiable instrument is incomplete and revocable until delivery of the instrument for the purpose of giving effect thereto. accepting.16 Complete but undelivered. Where the instrument is no longer in the possession of a party whose signature appears thereon. without authority. and not for the purpose of transferring the property in the instrument. if completed and negotiated.15 Incomplete Instrument not delivered • Where an incomplete instrument has not been delivered. Sec. the delivery. or endorsing. must be made either by or under the authority of the party making. • . drawing. in order to be effectual. it will not. a valid and intentional delivery by him is presumed until the contrary is proved. be a valid contract in the hands of any holder. or for a special purpose only.

• • • . or the alteration of an instrument in the name. it is wholly inoperative.meant the counterfeit making or fraudulent alteration of any writing. unless the party against whom it is sought to enforce such right is precluded from setting up the forgery or want of authority. Fraud in inducement. Example of fraud amounting to forgery. 23 • Where a signature is forged or made without authority of the person whose signature it purports to be.B obtains the signature of A telling the latter that it is only for autograph purposes. and no right to retain the instrument. and may consist in the signing of another’ name. or to enforce payment thereof against any party thereto. Then B writes above the signature a negotiable instrument. Forgery. B issues a check. It is merely a personal defense as distinguish from fraud in factum.FORGERY SEC. The check is not a forgery. amount. can be acquired through or under such signature.A sells to B a diamond ring which is in fact a glass only. The fraud here is in inducing B to issue a check. description of the person and the like with intent to defraud. or to give a discharge therefor.

the person who ought in any event to be ultimately liable as among the innocent persons involved in the transaction. was forged to make it appear that he had made an indorsement in favor of the forger. and no right to retain the instrument. such signature should be deemed as inoperative and ineffectual. is liable for the proceeds thereof to the payee or other owner. should therefore be allowed to recover from the collecting bank.[24] . it is wholly inoperative. in the case at bar.[23] However. herein respondent. by a desirable short cut. a bank or corporation who has obtained possession of a check upon an unauthorized or forged indorsement of the payeeユs signature and who collects the amount of the check from the drawee. and the proceeds are held for the rightful owners who may recover them.The collecting bank is liable to the payee and must bear the loss because it is its legal duty to ascertain that the payeeユs endorsement was genuine before cashing the check. regardless of whether the check was delivered to the payee or not. as the collecting bank. or to enforce payment thereof against any party thereto. respondentユs remedy is with the drawer and not with petitioner bank.[20] As a general rule.[21]The theory of the rule is that the possession of the check on the forged or unauthorized indorsement is wrongful. grossly erred in making payment by virtue of said forged signature. and when the money had been collected on the check.ハ Petitioner relies on the view to the effect that where there is no delivery to the payee and no title vests in him. such consideration is not material. the bank or other person or corporation can be held as for moneys had and received.Since the signature of the payee. another view in certain cases holds that even if the absence of delivery is considered.ハ In other words. unless the party against whom it is sought to enforce such right is precluded from setting up the forgery or want of authority. ハ The rationale for this view is that in said cases the plaintiff uses one action to reach. can be acquired through or under such signature. notwithstanding that the amount has been paid to the person from whom the check was obtained. or to give a discharge therefor. 2002 • Under Section 23 of the Negotiable Instruments Law:When a signature is forged or made without the authority of the person whose signature it purports to be.ハ Petitioner.[22]Petitionerユs claim that since there was no delivery yet and respondent has never acquired possession of the checks. The payee.Westmont Bank v Ong GR 132560 January 30. he ought not to be allowed to recover on the ground that he lost nothing because he never became the owner of the check and still retained his claim of debt against the drawer. the payee ought to be allowed to recover directly from the collecting bank. ハ The position of the bank taking the check on the forged or unauthorized indorsement is the same as if it had taken the check and collected the money without indorsement at all and the act of the bank amounts to conversion of the check.

however.[11]ハ There is nothing on record to show that the prima facie presumption created by the afore-quoted section was successfully refuted by the spouses.)The law merely requires that the instrument be in the possession of a person other than the drawer or maker. the provision of Section 14 of the Negotiable Instruments Law is pertinent:SEC. .[10]ハ Because of the presumption of authority. the couple's stance that they cannot be held liable for the check because they were not the ones who wrote the date. it must be filled up strictly in accordance with the authority given and within a reasonable time. and from such possession. Blanks. is untenable. the person in possession thereof has a prima facie authority to complete it by filling up the blanks therein.ハ And a signature on a blank paper delivered by the person making the signature in order that the paper may be converted into a negotiable instrument operates as a prima facie authority to fill it up as such for any amount. after completion. and he may enforce it as if it had been filled up strictly in accordance with the authority given and within a reasonable time. when may be filled. that any such instrument.ハ In order.Sergio & Milagros Ojeda v Andrelina Orbeta GR No. 14.142047 7/10/2006 • In any event. it is valid and effectual for all purposes in his hands.Sps.ハ Here. the name of the payee and the amount.Where the instrument is wanting in any material particular. the law presumes agency to fill up the blanks. . the burden of proving that there was no authority or that the authority granted was exceeded is placed on the person questioning such authority.ハ Even if the check was delivered to Orbeta in blank.ハ Therefore. is negotiated to a holder in due course. when completed may be enforced against any person who became a party thereto prior to its completion. we must stress that the presumption is that the latter had prima facie authority to complete the check by filling up the same. ハ (Emphasis supplied. the spouses do not deny that the check was delivered to Orbeta and that the signature appearing on the check belongs to Milagros Ojeda.ハ But if any such instrument. together with the fact that the instrument is wanting in a material particular.

and his capacity and authority to draw the instrument. ミ The acceptor by accepting the instruments engages that he will pay it according to the tenor of his acceptance. ハハハハハハ ハハハハハ With the above jurisprudential basis. and that they shall be so applied whenever the check is presented for payment. the latter becomes the depositor of the drawee bank.モハ Hence.モハ When the holder procures the check to be certified. 62. and this agreement is as binding on the bank as its notes circulation. with rights and duties of one in such situation. ハ Said certification メ implies that the check is drawn upon sufficient funds in the hands of the drawee. Seneris[28]:ハハハ[S]ince the said check had been certified by the drawee bank. the issues on Ong being not a holder in due course and failure or want of consideration for PCI Bankユs issuance of the managerユs check is out of sync. v. and shall continue good. that they have been set apart for its satisfaction. andハハハハハハハハハハハハ (b)ハ The existence of the payee and his then capacity to indorse.ハハハハハハハハハハハ By accepting PCI Bank Check No. メthe check operates as an assignment of a part of the funds to the creditors. the funds represented by the check are transferred from the credit of the maker to that of the payee or holder. the genuineness of his signature.Equitable PCI Bank v Rowena Ong GR No.156207 9/15/2006 • In the case of New Pacific Timber & Supply Co. as regards both parties. ハ Where a check is certified by the bank on which it is drawn.. and for all intents and purposes. the exception to the rule enunciated under Section 63 of the Central Bank Act to the effect メthat a check which has been cleared and credited to the account of the creditor shall be equivalent to a delivery to the creditor in cash in an amount equal to the amount credited to his accountモ shall apply in this case x x x. is to enable the holder to use it as money. 073661 issued by Sarande to Ong and issuing in turn a managerユs check in exchange thereof.ハ The object of certifying a check. Liability of acceptor. by the certification. PCI Bank assumed the liabilities of an acceptor under Section 62 of the Negotiable Instruments Law which states:ハハハハハハハハハハハハ Sec. or any other obligation it can assume. and admits ミハハハハハハハハハハハハ (a)ハ The existence of the drawer. a certificate of deposit payable to the order of depositor.ハ . ハ It is an understanding that the check is good then. Inc. the certification is equivalent to acceptance.

But when an instrument has been materially altered and is in the hands of a holder in due course not a party to the alteration. A makes a note for P1. B and C consented to alter the note to P4. E. Can F collect from A? How about with regards to B. and F who is not a holder in due course. Can he collect from A and how much? . or assented to the alteration and subsequent endorsers. authorized. C.ALTERATION • • • • SEC 124 Where a negotiable instrument is materially altered without the assent of all parties liable thereon. it is avoided. and E? Suppose F is a holder in due course. B negotiates the note to C.000 and thereafter negotiates it D. except as against a party who has himself made.000 payable to the order of B. Ex. D. he may enforce payment thereof according to its original tenor.

either principal or interest 3.Or which adds a place of payment where no place of payment is specified.The medium or currency in which payment is to be made 6.WHAT CONSTITUTES MATERIAL ALTERATION? • • • • • • • SEC125.The number or the relations of the parties 5. .The sum payable. is a material alteration.The date 2. or any change or addition which alters the effect of the instrument in any respect.The following constitutes material alteration: 1.The time or place of payment 4.