Syllabus Negotiable Instruments Law New (1)

SYLLABUS Negotiable Instruments Law (Act No. 2031) Atty. Avelino M. Sebastian, Jr. I.

Introduction • • • • • •

II.

Origin Purpose Application Ang Tiong v Ting, 22 SCRA 713 Types of Negotiable Instruments Distinctions Concept of Real and Personal Defenses

Form of Negotiable Instruments • • • • • • • • • • • • • • • • • • •

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Promissory Note Bills of Exchange Garcia v Lacuesta (90 Phil 489) Secs. 7, 8, and 9 of Electronic Commerce Act of 2000 (R.A. 8792) Promise to Pay Order to Pay Certainty of Sum Payment of Interest and the Usury Law (Act 2655) Effect of Unliquidated Amounts Payment of Attorney’s Fees (Art. 2208, Civil Code) Effect of Installment Payments Legal Tender (Art. 1249, Civil Code) Foreign Currency and the Uniform Currency Act (R.A. 529) Unconditionality of Promise or Order to Pay Source of Funding or Reimbursement Keck v Yakima Savings, 295 Pac 311 Concept of Future or Determinable Future Time Payable at or after Sight On or before a specific date • Rehabilitation Finance Corporation v CA, 94 Phil 984 Effect of Acceleration Clause and MAC Extension of Due Date • State Bank of Halstad v Bilstad, 162 Iowa 433, 136 N.W. 204 • Security Bank of Sioux City v Gunderson, 52, S.S. 15, 216 N.W. 595 Provisions not Affecting Negotiability Negotiability of Secured Instruments Statement of Underlying Transaction Effect of Conjunctive Obligations

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Prestation “to do” (Art. 1107, Civil Code) Test of negotiability Waiver of Debtor’s Rights Acts exercisable at Option of the Holder Confession of Judgment PNB v Manila Oil Refining and By-Products Co. Inc., 43 Phil 444 Omissions in a Negotiable Instrument Instruments Payable on Demand Art. 1197, Civil Code Instruments Payable to Order Designation of Payee Instruments Payable to Bearer Concept of a Fictitious Person Limjoco v Intestate Estate of Pedro Fragante, 80 Phil 776 Nazareno v Court of Appeals, 343 SCRA 637 Date of a Negotiable Instrument Relevance Ante-dating and Post-dating of instrument • Triphonoff v Sweeney, et al., 65 Pre 299, 130 Pac 979 Insertion of Date

Completion and Delivery of Instruments •

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Incomplete but Delivered Instruments • Authority to complete the Instrument • Rights of a holder in due course • Instruments delivered in blank Incomplete and Undelivered Instruments • Pavilis v Farmers Union Livestock Commission, 68 S.D.96, 298 N.W. 732 • Weiner v Pennsylvania Co., 160 Pa Super 320 • Linick v A.J. Nutting & Co., 125 N.Y.S. 93 Complete but Undelivered Instruments • Delivery subject to Conditions

In Re Marten’s Estate, 226 Iowa 162, 283 N.W. 885 IV.

Rules of Construction • Continental Illinois Bank v • Clement, 259 Mich 167

V.

Liability of Persons signing an Instrument • • •

Signing in Trade or Assumed Name Signing as an Agent • Insular Drug v PNB, 58 Phil 684 Signature by Procuration

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Indorsement by Infant or Corporation • Murray v Thompson, 136 Tenn 118

Forgery and Alteration Forgery: • • • • • • • •

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Fraud in Factum Fraud in Inducement Fraud in Civil Law Duress Amounting to Forgery Fraudulent Impersonation • Theory of Double Intent • Procedural Requirement Effects of Forgery Extent of Effects of Forgery Parties barred from setting up the defense of forgery • Endorsers • Persons negotiating by delivery • Acceptors • Persons in estoppel • Persons guilty of negligence Forgery of Notes • Note Payable to Order • Note Payable to Bearer • Forgery of Maker’s signature Forgery of Bills of Exchange • Endorsement of a Bill Payable to Order • PNB v Quimpo, 158 SCRA 582 • Endorsement of Bill Payable to Bearer • Forgery of Drawer’s Signature with Acceptance • Forgery of Drawer’s Signature without Acceptance • PNB v National City Bank of New York, 63 Phil 711 • San Carlos Milling v BPI, 59 Phil 59 • Liability of Party Negotiating after Forgery • Negligence of Drawer in Forgery of Indorsement other than a Check • Negligence of Drawer in Forgery of Indorsement of a Check • Payee’s Negligence in Forgery of Drawer’s Signature

Alteration: • • • • •

Definition What Constitutes Material Alteration Effects of Material Alteration Banco Atlantico v Auditor General, 81 SCRA 335 Foutch v Alexandria Bank, 177 Tenn 348, 149 S.W. (3d) 76

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Saving Bank of Richmond v National Bank of Goldsboro, 3F.ed790 Critten v Chemical National Bank, 171 N.Y. 219, 63 N.E.969 Marine National Bank v National City Bank, 59 N.Y. 67 24-Hour Clearing Rule Metropolitan bank v HSBC, 118 SCRA 537 Republic Bank v CA, 196 SCRA 100

Summary of Rights and Liabilities in relation to Forgery • • VII.

Consideration of Negotiable Instruments • • •

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Promissory Note Bills of Exchange • Great Eastern Life Insurance Co. v HSBC, Phil 678

Presumption of Consideration and Rebuttal What Constitutes “Value” • Art. 1350, Civil Code Holder for Value • General Rule • Expanded Rule • Lien Holder Want of Consideration vs. Failure of Consideration • Elgin National Bank v Goecke, et al., 295 Ill 403, 129 N.E. 149 • Dougherty v Salt, 227 N.Y. 200, 135 N.E. 94 • William Barco & Sons v Forbes, 194 N.C. 204, 139 S.E. 227 Nature of Defense Liability of an Accommodation Party • Maulini v Serrano, 28 Phil 640 • Ang Tiong v Ting, 22 SCRA 712 Rights of Accommodation Parties amongst themselves • Sadaya v Sevilla.19 SCRA 924 • Art. 2073, Civil Code Application of “holder for value” • Acuña v Veloso and Javier,50 Phil 241

Negotiation: • • • •

What constitutes Negotiation Difference from an Assignment Transfers by operation of law Initial Delivery of Instrument

Indorsement: • •

How made Alonge • Clark v Thompson, 104 Ala 504, 60 So. 925

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• • • • • • • • IX.

Indorsement for the full instrument • Blake v Weiden, 291 N.Y. 134, 51 N.E. 2d 667 Kinds of Indorsement Restrictive Indorsement • Indorsement “as agent for” • Granado v Riverdale, Inc., C.A. 24147-R, 27 November 1964 • Indorsement “in trust for” • Sulbrason-Dickenson Co. v Hopkins, 170 US 326 • Atlantic v Comm. Lumber Co., 155 Atl. 762 • White v National Bank, 102 U.S. 658 • Leonardo v Chase National Bank, 363 App. Div. 552, 33 N.Y.S. 2d 796 Effects of Restrictive Indorsement Qualified Indorsement • Effects • Liability of Qualified Indorser • Fay v White, 262 N.Y. 215, 186 N.E. 678 • Copeland v Burke, 59 Okla 219, 158 Pac. 1162 • Hutson v Rankin, 36 Idaho 169, 213 Pac 345 Conditional Indorsement Indorsement of Bearer Instrument Indorsement to two or more persons Indorsement to a corporate official • Johnson v Buffalo Bank, 112 N.W. 165 Indorsement by a Representative Time and Place of Indorsement Striking out of Indorsement Transfers without Indorsement

Rights of a Holder • •

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Holder in Due Course Elements • Complete and regular upon its face • Materiality of Omission • Receipt before Instrument is overdue • Montinola v PNB, 88 Phil 178 Without notice of prior dishonor • Holder in good faith • Failure to make inquiry • Vicente R. de Ocampo & Co. v Anita Gatchalian, 3 SCRA 596 • Acquisition for Value • Defects of Title • Defenses • Infirmities of an Instrument • Rights of a Holder in Due Course

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Liabilities of Parties •

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Real and Personal Defenses Fossum v Fernandez Hermanos, 44 Phil 713 Presumption in favor of holder in due course Asia BankingCorporation v Ten Sen Guan y Sobrinos, 44 Phil 511

Liability of Maker • PNB v Maza and Macenas, 48 Phil 207 • Tan Sua Sia v Yu Biao Sontua, 56 Phil 707 • Araneta V Perez, 14 SCRA 498 • Republic v vda de Yulo, 16 SCRA 658 • Parot v Gemora, 7 Phil 94 • Clark v Sellner, 42 Phil 384 • Warranties of Maker and defenses barred Liability of Drawer • Warranties and defenses barred • Secondary liability • Kauffman v PNB, 42 Phil 182 • Liability of unaccepted bill • Reimbursement of drawee • PNB v CA, 122 SCRA 553 Liability of Acceptor • Warranties and defenses barred • Acceptor primarily liable • PNB v Picornell, 46 Phil 716 • Effect of mortgage • Asia Banking v Lacson Company, 48 Phil 482 • Bills altered before acceptance Liability of an Indorser • Who is deemed an indorser • American Bank v Macondray & Co., 4 Phil 695 • Concept of an irregular indorser • Liability of person negotiating by delivery or qualified indorsement • Warranties and Defenses barred • Liability of general indorser • Warranties and defenses barred • PNB v CA, 25 Phil 693 • Liability of indorser of a bearer instrument • Order of liability

Presentment for Payment • • • •

Concept of presentment for payment Holding persons secondarily liable on the instrument Demand instrument vs time instrument Concept of “reasonable time”

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Dishonor • • • • • • • • • • • • • •

XIII.

Notice of Dishonor • Asia Banking v Javier, 44 Phil 777 Statutory exceptions to the rule relating to notice of dishonor By whom given Effect of notice of dishonor Form and sufficiency of notice of dishonor Sufficiency of service of notice of dishonor To whom notice of dishonor is given Timeliness (or delay) of notice of dishonor Waiver of notice Dispensing notice of dishonor Dispensing notice to drawer, indorsers Effect of dishonor by non-acceptance Notice of dishonor by non-acceptance Protest for non-acceptance or non-payment

Discharge of Instrument • • • • • • • • •

XIV.

Sufficiency of presentment Place of presentment Exhibition of instrument Special rules on presentment for payment Dispensing presentment to charge drawer or indorser Delay in presentment When presentment is excused Dishonor of instrument by non-payment Liability of persons secondarily liable Payment in due course Summary of rules relating to presentment for payment

Party to effect discharge Third party payment (Arts. 1236 and 1237. Civil Code) Extension of time of payment Discharge of instrument by operation of law Payment by check (Art. 1249, Civil Code) Discharge of persons secondarily liable Payment by a person secondarily liable Renunciation by holder Effect of unintentional cancellation of instrument

Bills of Exchange • • •

Definition Effects Inland and Foreign Bills

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Acceptance of bills Form of acceptance Effect of promise to accept Timeliness of acceptance Acceptance of incomplete bill Kinds of Acceptance Presentment for Acceptance How and when made When presentment is excused Dishonor by non-acceptance Protest, meaning How, when and where made Acceptance for honor Payment for honor Bills in set

Promissory Note and Check • • • • • • •

Definitions • Republic v PNB, 3 SCRA 851 Different types of checks Crossing of checks Timeliness of presentment of checks for payment Certification of checks • Panlilio v David, 50 Phil 105 Assignment of funds • Gregorio Araneta, Inc. v Tuason de Paterno, 91 Phil 786