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-payee or indorsee of

a bill or a note, who is

Holder in possession of it, or
the bearer thereof.
(sec. 191)
Sec. 17. Construction where instrument is
 (a) Where the sum payable is expressed in words and also in figures and there is a
discrepancy between the two, the sum denoted by the words is the sum payable; but if
the words are ambiguous or uncertain, reference may be had to the figures to fix the
“September 15, 2016
“For value received, I hereby promise to pay Juan Santos or order the sum of TEN THOUSAND
PESOS (P100,000) thirty (30) days from date hereof.
(Signed) Pedro Cruz”

“September 15, 2016

“For value received, I hereby promise to pay Juan Santos or order the sum of TEN HUNDRED
THOUSAND PESOS (P100,000) thirty (30) days from date hereof.
(Signed) Pedro Cruz”
 (b) Where the instrument provides for the payment of interest,
without specifying the date from which interest is to run, the interest
runs from the date of the instrument, and if the instrument is
undated, from the issue thereof.
 (c) Where the instrument is not dated, it will be considered to be
dated as of the time it was issued;
no date

“For value received, I hereby promise to pay Juan Santos or order the
sum of TEN THOUSAND PESOS (P10,000) with interest of 12% thirty (30)
days from date hereof.
(Signed) Pedro Cruz”
 (d) Where there is a conflict between the written and printed
provisions of the instrument, the written provisions prevail;
 (e) Where the instrument is so ambiguous that there is doubt
whether it is a bill or note, the holder may treat it as either at his
 (f) Where a signature is so placed upon the instrument that it is not
clear in what capacity the person making the same intended to
sign, he is to be deemed an indorser;
 (g) Where an instrument containing the word "I promise to pay" is
signed by two or more persons, they are deemed to be jointly and
severally liable thereon.
Kinds of Holder

Holder for value – one who has given value for an instrument
issued or negotiated to him.

Holder in due course – refer to Sec. 52

Holder not in due course –when any of the

conditions in number is absent, the holder is
not a holder in due course.
Rights of a holder in due course (sec. 51-

Rights To sue on the instrument in his own name

To receive payment of the instrument, and if the payment

Of a is in due course, the instrument is discharged.

Holder To hold the instrument free from any defect of title of prior
parties and free from defenses available to the parties
In Due among themselves.
To enforce payment of the instrument for the full amount
Course thereof against all parties liable thereon,
Sec. 52
 Sec. 52. What constitutes a holder in due course. –
 A holder in due course is a holder who has taken the instrument
under the following conditions:
 (a) That it is complete and regular upon its face;
 (b) That he became the holder of it before it was overdue, and
without notice that it has been previously dishonored, if such was
the fact;
 (c) That he took it in good faith and for value;
 (d) 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.
Holder not In due Course

Rights To sue on the instrument in his own name

To receive payment of the instrument, and if the payment

Of a is in due course, the instrument is discharged.

Holder To hold the instrument but is subject to the defenses as if

were non-negotiable.
Not In
Due To have all the rights of a holder in due course if he derives
his title through such holder and he himself is not a party to
Course any fraud or illegality affecting the instrument.
Liabilities of General Indorser – Sec. 66

He warrants that the

He warrants that all prior
instrument is genuine and He warrants that he has
parties had capacity to
in all respects what it good title to it.
purports to be.

He engages that on due

He warrants that the presentment, the bill will be
accepted or paid or both and
instrument is valid and that in case of dishonor, he shall
subsisting. the pay the bill to holder or
subsequent indorsee.
Sec. 14 – Mechanically Incomplete but
Delivered Instrument

- refers to an instrument which is wanting in a material

particular such as the amount of the instrument, and it is
delivered to another for him to fill the blank or blanks and
negotiate it either for his own benefit or that of the person
making the instrument.
Prima facie authority on ID instrument

Prima facie authority to fill up the blanks

• A person in possession of an instrument wanting in any material particular
has a prima facie authority to complete it by filling up the blanks therein.

Prima facie authority to fill up the instrument for any amount.

• This prima facie authority exists when the ff. facts concur:
• a. There is signature on a blank paper thereon
• b. The person who signed the instrument in blank delivers it to another in
order that it may be converted into a negotiable instrument.

• Thus if a promissory note executed by M is

blank as to amount or due date and it is in the
a. possession of P, P has the prima facie authority
to fill up the blank by placing the amount or
due date.

• M signs a promissory note payable to the

order of P. The note is blank as to amount. M
delivers the incomplete note to P so that P
may negotiate it to another. There is prima
facie authority for P to put in any amount on
the blank.
Problem #1:

 B, a bank clerk, send a blank card to C, a client of the bank, for C

to put his specimen signature on the card. C signs the card and
sends it back to B. Upon receipt of card, B types the following
above C’s signature “ I promise to pay B or order P 10,000”. B
endorsed the instrument to A, a holder in due course. Can A
enforced it against C?

No, there is no prima facie authority here for B to fill up the blank because there was no
intention on the part of C to convert the paper into a negotiable instrument. Fraud in fact is
committed which is a real defense.
Problem #2

Lorenzo signed several blank checks instructing her

secretary, Nicky, to fill them as payment for his obligations.
Nicky filled one check with her name as payee, placed
P30,000 thereon, endorsed and delivered it to Evelyn as
payment for goods the latter delivered to the former.
When Lorenzo found out about the transaction, he
directed the drawee bank to dishonor the check. When
Evelyn encashed the check, it was dishonored. Is Lorenzo
liable to Evelyn?

 Yes. This covers the delivery of an incomplete instrument under Sec.

14 of NIL, which provides that there was prima facie authority on
the part of Nicky to fill-up any of the material particulars thereof.
Having done so, and when it is first completed before it is
negotiated to a holder in due course like Evelyn, it is valid for all
purposes and she may enforce it within a reasonable time, as if it
had been filled up strictly in accordance with the authority given.
 Section 14 merely raises a personal defense, (see Sec. 58.) The rule
is founded upon the principle that where one of two persons must
suffer by the bad faith of another, the loss must fall upon the one
who first reposed confidence and made it possible for the loss to
Sec. 15 Incomplete and Undelivered
Instruments (IU)

This refers to an instrument which is wanting in a

material particular such as the amount of the
instrument or the name of the payee, and it is
The instrument shall not be valid in the hands of
any holder, as against any person whose signature
was placed thereon before delivery.
Rules where the instrument is incomplete
and undelivered.

(1) Defense even against a holder in due course. — The fact

that an incomplete instrument, completed without
authority, has not been delivered, is a defense even against
a holder in due course.

(2) Defense available to parties prior to delivery.—The

invalidity of the above instrument is only with reference to
the parties whose signatures appear on the instrument
before and not after delivery.

 Pocholo signed a blank check and kept it in his safe. This was stolen
by Edwin who filled in the amount and placed a fictitious person as
payee signed the name of the payee and indorsed the same to
Paolo, Paolo to Patrick, Patrick to Sally, Sally to Jeddah, Jeddah to
Rhia. All of the subsequent indorsers as well as the holder were all
holders in due course.
Question: May Rhia proceeded against Pocholo in case of dishonor by
the drawee bank?
Answer: NO… because there was no valid DELIVERY which is essential
to the validity of the instrument.

 Under the same set of facts, if Pocholo as well as the drawee bank
dishonors the check, may Rhia proceed against the Jeddah?
Answer: Yes, because Jeddah as an indorser warrants that the
instrument is what it purports to be and if it is dishonored and
necessary proceedings for dishonor taken, she shall pay the holder,
 Under the same set of facts, in case of dishonor by the drawee
bank and/or Pocholo and the other indorsers, is Edwin liable?
Answer: Yes, he was the one responsible for the theft, the filling up
and subsequent negotiation of the instrument.
Section 16 Complete but Not Delivered

 As a general rule, a negotiable instrument like any other written contract, has no legal
inception or existence, as such, until it has been delivered in accordance with the
purpose and intent of the parties. Without the initial delivery of the instrument, there can
be no liability thereon. Moreover, such delivery must be intended to give effect to the
 An undelivered instrument is inoperative because delivery is a prerequisite to liability.
However, if the instrument is no longer in the possession of the person who signed it and it
is complete in its terms, "a valid and intentional delivery by him is presumed until the
contrary is proved
If a complete instrument is found in the possession of an
immediate party or a remote party other than a holder in
due course, there is a prima facie presumption of delivery
but subject to rebuttal.
If a complete instrument is in the hands of a holder in due
course, a valid delivery thereof by all parties prior to him is
conclusively presumed.
General rule. — As a general rule, only persons whose
signatures appear on an instrument are liable thereon.

 Exceptions. —
The following are the exceptions to the general rule:
(a)Where a person signs in a trade or assumed name. (Sec. 18)
(b)The principal is liable if a duly authorized agent signs on his own
behalf (Sec. 19.
(c)(c) In case of forgery (Sec. 23.), the forger is liable even if his
signature does not appear on the instrument
(d)(d) Where the acceptor makes his acceptance of a bill on a
separate paper (Sec. 134.); and (
(e)(e) Where a person makes a written promise to accept a bill before
it is drawn. (Sec. 135.)
Sec. 18 Liability of person signing in trade
or assumed name.

 Signing in a trade or assumed name. — One who signs in

a trade or assumed name is liable as if he signed his own
name. It is necessary, however, that the party who signed
intended to be bound by his signature.
Sec. 19. Signature by agent
Sec. 20 Liability of person signing as agent, and so forth

When agent may escape personal liability.

(1) In order that an agent who signs a negotiable instrument
may escape personal liability, the following are the
(a) He is duly authorized;
(b) He adds words to his signature indicating that he signs as
an agent, that is, for or on behalf of a principal, or in a
representative capacity; and
(c) He discloses his principal.
Sample signatures

(a) "Jovencio F. Cinco By: (Sgd.) Catalino R. Castaneda, Jr.

or Agent/’
(b) "(Sgd.) Catalino R. Castaneda, Jr. or As agent of
Jovencio F. Cinco;“
(c) "(Sgd.) Catalino R. Castaneda, Jr.
 "Dante Q. Pantaleon, Principal (Sgd.) Catalino R.
Castaneda, Jr.,"
 "(Sgd.) Catalino R. Castaneda, Jr., agent."
Sec. 21 Signature by Procuration

Procuration is defined as "the act by which a

principal gives power to another to act in his place
as he could himself.
EXAMPLE: A signature by procuration may be
made as follows: Jovencio F. Cinco Per
Procuration: Domingo M. Navarro Instead of "per
procuration/' it may also be expressed thus: "per
pro.," "per proc.," "P.P." or "PP."
 (1) Where agent exceeded his authority. — The principal is not bound if the
agent has exceeded the actual limits of his authority, although he may have
acted within the general scope of the agency

 (2) Where agent acted with abuse of authority given•—But where the agent has
authority to do the particular act in question, his abuse of such authority is not a
defense against a bona fide holder for value. (Bryant, Powis & Bryant v. Quebec
Bank [1893], A.C. 170,179.) Where by resolution of the board of directors, A, the
chairman of the corporation, is authorized to accept bills drawn by R against the
deposit of securities and A accepts a bill drawn by P signing "per pro," and
without requiring the deposit of security and the bill is negotiated to a bona fide
holder, held: the company is liable.
SECTION 22. Effect of Indorsement By
Infant or Corporation
I promise to pay to the order of B the sum of Five Thousand Pesos (P5,000.00) 30 days after date.
(Sgd.) A

B, payee, subsequently indorses the above promissory note to X, X to Y,

and Y to Z (a minor). Then Z indorses the instrument to C, C to D, holder

If A, maker, dishonors the promissory note by non-payment, D,

the holder, can collect from any of the parties secondarily liable,
X, Y and C, but not from Z because, as the rule says, a minor or
infant can pass valid title but cannot be held liable. Z can claim
a real defense of minority.
QUESTION: PN makes a promissory note for P5,000.00, but leaves
the name of the payee in blank because he wanted to verify its
correct spelling first. He mindlessly left the note on top of his desk
at the end of the workday. When he returned the following
morning, the note was missing. It turned up later when X
presented it to PN for payment. Before X, T, who turned out to
have filched the note from PN’s office, had endorsed the note
after inserting his own name in the blank space as the payee. PN
dishonored the note, contending that he did not authorize its
completion and delivery. But X said he had no participation in, or
knowledge about, the pilferage and alteration of the note and
therefore he enjoys the rights of a holder in due course under the
Negotiable Instruments Law.
a) Who is correct and why?