Summary of Bar Examination Cases and Answers based on Answers to Bar Examination Questions in Mercantile Law (198! "#1#$ of t%e &' Law Comlex) and sound lo*ic+ ME,CA-./LE LA0 ,E/E0 -e*otiable /nstruments Law 2E-E,AL ',/-C/'LES A+ .3E4,5 #1+ 0%at are t%e re6uisites of a ne*otiable instruments7 19:) 19;) 19<;) 19<8) 1989) 1991) 199<) Bar Examinations=+
SUGGESTED ANSWER: An instrument to be negotiable must conform to the following requirements/the requisites of a negotiable instrument are as follows: a !t must must be in in writin writing g an" signe signe" " b# the ma$e ma$err or "rawe "rawer% r% b !t must contain an uncon"itional &romise or or"er to &a# a sum certain in mone#% c !t must must be &a#able &a#able on "eman" "eman" or at a fi'e" fi'e" or "etermi "eterminable nable future future time% time% " !t must must be &a#abl &a#ablee to or"e or"err or bearer% bearer% e Where the the instrument instrument is a""resse" a""resse" to a "rawee( "rawee( he must must be name" or otherwi otherwise se in"icate" in"icate" therein therein with reasonable certaint# )Section *( Negotiable !nstruments +aw,
#"+ 0%at constitutes a %older in due course7 Q&ES./4- -4+ 1) 199<) Bar Examinations=+
SUGGESTED ANSWER: A -!D. is one who has ta$en the instrument un"er the following con"itions: a That That it is com& com&let letee an" regul regular ar u&on u&on its A.E% A.E% b That he became the hol"er of it before it was 01ERDUE an" without notice that it ha" been &re2iousl# "ishonore"( if such was the fact% c That That he too$ too$ it it in in goo" goo" fait faith h an" for 2alue% 2alue% " That at the the time it was was negotiate" negotiate" to him( him( he ha" no notice notice of an# infirm infirmit# it# in the instru instrument ment or "efect in the title of the &erson negotiating ne gotiating it )Section 34( Negotiable !nstruments +aw,
#:+ Can a bill of exc%an*e or a romissory note 6ualify as a ne*otiable instrument if ! a+/t is not dated> or b+.%e date and t%e mont%) but not t%e year of its maturity is *i?en> or c+/t is ayable to cas%> or d+/t names two alternati?e drawees Q&ES./4- -4+ 1#) 199) Bar Examinations=+
SUGGESTED ANSWER: a. 5ES Date is N0T a material &articular require" b# Section * of N!+ for the negotiabilit# of an instrument b. N0 The time for &a#ment is N0T "eterminable "eterminable in this case The #ear is N0T state" state" c. 5ES Section 6)",( N!+ ma$es the instrument &a#able to bearer b ecause the name of the &a#ee "oes N0T &ur&ort to be the name of an# &erson !n Ang Te$ +ian 2s .A 7+843*9( Se&tember 43( *63,;( the Su&reme .ourt reasone" that “Under the Negotiable Instruments Law (sec. 9 [d], a check drawn paable to the order o! "cash" is a check paable paab le to bearer, bearer, and the bank ba nk ma pa it to the person presenting it !or pament without the drawer#s indorsement.$ d. A bill ma# N0T be a""resse" to two or more "rawees )Ws, in the alternati2e or in succession( to be negotiable )Section *4<( N!+, To To "o so ma$es the or"er con"itional #;+ A romissory note reads as follows@ / romise to ay 2abriela Silan*an '1) ###+## t%ree years after t%e unconditional wit%drawal of t%e &+S+ of its military bases in t%e '%iliines+ iscuss t%e ne*otiability or non!ne*otiability of t%e note abo?e 19<< Bar Examinations=+
SUGGESTED ANSWER: ANSWER: The =N is N0T negotiable because )*, it con tains a con"ition in its sti&ulation to &a# Gabriela Silangan after the un con"itional with"rawal of the US of its militar# bases in the =hili&&ines( an" )4, it is not ma"e &a#able to or"er or bearer Section * of the N!+ suggests that an instrument to be negotiable must conform to the following requirements: a !t must must be in in writin writing g an" signe signe" " b# the ma$e ma$err or "rawe "rawer% r% b !t must contain an uncon"itional &romise or or"er to &a# a sum certain in mone#% c !t must must be &a#able &a#able on "eman" "eman" or at a fi'e" fi'e" or "etermi "eterminable nable future future time% time% " !t must must be &a#abl &a#ablee to or"e or"err or bearer% bearer% e Where the the instrument instrument is a""resse" a""resse" to a "rawee( "rawee( he must must be name" or otherwi otherwise se in"icate" in"icate" therein therein with reasonable certaint# )Section *( Negotiable !nstruments +aw, .A1EA .A1EAT: T: ! coul" not fin" an answer to this question so ! answere" it m#self Answer at #our own ris$ #+ (a$ '- maDes a romissory note for ')###+##) but lea?es t%e name of t%e ayee in blanD because %e wanted to ?erify its correct sellin* first+ 3e mindlessly left t%e note on to of %is desD at t%e end of t%e worDday+ 0%en %e returned t%e followin* mornin*) t%e note was missin*+ /t
turned u later w%en resented it to '- for ayment+ Before ) .) w%o turned out to %a?e filc%ed t%e note from '-Fs office) %ad endorsed t%e note after insertin* %is own name in t%e blanD sace as t%e ayee+ '- dis%onored t%e note) contendin* t%at %e did not aut%oriGe its comletion and deli?ery+ But said %e %ad no articiation in) or Dnowled*e about) t%e ilfera*e and alteration of t%e note and t%erefore %e enHoys t%e ri*%ts of a %older in due course under t%e -e*otiable /nstruments Law+ 0%o is correct and w%y7 /-C4M'LE.E A- &-EL/E,E /-S.,&ME-. .4'/C= (b$ Can t%e ayee in a romissory note be a I%older in due courseF wit%in t%e meanin* of t%e -e*otiable /nstruments Law7 Question -o+ / (b$) "### Bar Examinations=+
SUGGESTED ANSWER: )a, =N is correct The instrument is incom&lete an" un"eli2ere" !t "i" N0T create an# contract that woul" bin" =N to an obligation to &a# the amount thereof )b, A &a#ee )=, in a &romissor# note .ANN0T be a -0+DER !N DUE .0URSE )-!D., within the meaning of the N!+ because a )=, is an imme"iate &art# in relation to the ma$er )>, The )=, is sub?ecte" to whate2er "efenses( real or &ersonal( a2ailable to the )>, of the &romissor# note A+TERNAT!1E ANSWER: )b, A )=, can be a -!D. A -!D. is "efine" as the )=, or !n"orsee )!e, of the instrument who is in &ossession of it E2er# hol"er is "eeme" &rima facie to be -!D. )Section 36( N!+, #<+ 3ow do you treat a ne*otiable instrument t%at is so ambi*uous t%at t%ere is a doubt w%et%er it is a bill or a note7 1999) Bar Examinations=+
SUGGESTED ANSWER: Section *@ )e, of the N!+ &ro2i"es that where the instrument is so ambiguous that there is "oubt whether it is a bill or a note( the hol"er ma# treat it as either at his election #+ 0%en a si*nature is so laced uon a ne*otiable instrument t%at it is not clear in w%at caacity t%e erson maDin* t%e same intended to si*n) w%at is %is liability7 19;<) Bar Examinations=+
SUGGESTED ANSWER: When a signature is so &lace" u&on the instrument that it is N0T clear in what ca&acit# the &erson ma$ing the same inten"e" to sign( he is to be "eeme" an in"orser 7Section *@ )f,( N!+; !f treate" as an in"orser of the instrument( he is chargable onl# after &resentment an" notice of "ishonor As general in"orser( he warrants that )a, the instrument is GENU!NE an" in all res&ects what it &ur&orts to be% )b, that he has a G00D title to it% )c, that all &rior &arties ha" .A=A.!T5 to contract% an" )", that the instrument is( at the time of his in"orsement( 1A+!D an" SUS!ST!NG !n a""ition( he eng ages that( on "ue &resentment( it shall be acce&te" or &ai"( or both( as the case ma# be( accor"ing to the tenor( an" that
if it be "ishonore" an" the necessar# to &rocee"ings on "ishonor be "ul# ta$en or to an# subsequent in"orser who ma# be com&elle" to &a# it )Section 99( N!+, #8+ 0%en a ne*otiable instrument contains t%e words / romise to ay and is si*ned by two or more ersons) w%at is t%eir liability) Hoint or solidary7 Exlain 19;<) Bar Examinations=+
SUGGESTED ANSWER: Where an instrument containing the wor"s B! &romise to &a#C is signe" b# two or more &ersons( the# are "eeme" to be ?ointl# an" se2erall# liable thereon 7Section *@( )g,( N!+; B+ .ES.S 4J -E24./AB/L/.5 #9+ (a$ M' bou*%t a used cell%one from K,+ K, referred cas% but M' is a friend so K, acceted M'Fs romissory note for '1#)###+##+ K, t%ou*% of con?ertin* t%e note into cas% by indorsin* it to %is brot%er ,+ .%e romissory note is a iece of aer wit% t%e followin* %and!rinted notation@ M' 0/LL 'A5 K, .E-.34&SA- 'ES4S /- 'A5ME-. J4, 3/S CELL'34-E 4-E 0EE J,4M .4A5+ Below t%is notation is M'Fs si*nature wit% 81## next to it) indicatin* t%e date of t%e romissory note+ 0%en K, resented M'Fs note to ,) t%e latter said it was not a ne*otiable instrument under t%e law and so could not be a ?alid cas% substitute+ K, tooD t%e oosite ?iew) insistin* on t%e noteFs ne*otiability+ 5ou are asDed to referee + 0%ic% of t%e oosin* ?iews is correct7 Exlain Question -o+ ) "### Bar Examinations=+
(b$ .3 is an indorsee of a romissory note t%at simly states@ 'A5 .4 K&A- .A- 4, 4,E, ;## 'ES4S+ .%e note %as no date) no lace of ayment) and no consideration mentioned+ /t was si*ned by M and written under %is letter%ead secifyin* t%e address) w%ic% %aens to be %is residence+ .3 acceted t%e romissory note as ayment for ser?ice %e rendered to S3) w%o in turn recei?e t%e note from K&A- .A- as ayment for a reaid cell%one card wort% ;# esos+ .%e ayee acDnowled*ed %a?in* recei?ed t%e note on Au*ust 1) "###+ A Bar re?iewee %ad told .3) w%o %aens to be your friend) t%at .3 is -4. a %older in due course (3/C$ under Section " of t%e -/L and t%erefore does -4. enHoy t%e ri*%ts and rotection under t%e statute+ .3 asDs for your ad?ice secifically in connection wit% t%e note bein* undated and not mentionin* t%e lace of ayment and any consideration+ 0%at would your ad?ice be7
SUGGESTED ANSWERS: )a, R is correct The &romissor# note is N0T negotiable !t is not issue" to the or"er or bearer There are no wor"s of negotiabilit# containe" therein !t is N0T issue" in accor"ance with Section * of the N!+ )b, The fact that the instrument is un"ate" an" "oes N0T mention the &lace of &a#ment "oes N0T militate against its being negotiable The "ate an" &lace of &a#ment are N0T material &articulars require" to ma$e an instrument NEG0T!A+E Section <) (c$) -/L= The fact that no mention is ma"e of an# consi"eration is N0T material .onsi"eration is &resume" Section ";) -/L= 1#+ 'erla bou*%t a motor car ayable in installments from Automatic Comany for '"#) ###+## wit% a '#)###+## down ayment+ S%e executed a romissory note for t%e balance w%ic% reads@
Jor ?alue recei?ed) / romise to ay Automoti?e Comany or order at its office in Le*asi City) t%e sum of '"##)###+## wit% interest at 1"N er annum) ayable in e6ual installments of '"#)###+## for ten (1#$ mont%s startin* "1 4ctober "##"+ Manila) "1 Setember "##" S2 'erla 'ay to t%e order of ,eliable Jinance Cor+ Automoti?e Comany By@ (S*d+$ Mana*er Because 'erla defaulted in t%e ayment of %er installments) ,JC initiated a case a*ainst %er for t%e sum of money+ 'erla ar*ued t%at t%e romissory note is merely an assi*nment of credit) a non! ne*otiable instrument oen to all defenses a?ailable to t%e assi*nor and) t%erefore) ,JC is -4. a %older in due course+ (a$ /s t%e romissory note a mere assi*nment of credit7 4r a ne*otiable instrument7 0%y7 199" Bar Examinations= (b$ /s ,eliable Jinance Cor+ a 3/C7 Exlain briefly+
SUGGESTED ANSWER: )a, The =N in the &roblem is a negotiable instrument being in com&liance with the &ro2isions of Section *( of the N!+ Neither the fact that the &a#able sum is to be &ai" with interest nor that the maturities are in state" installment ren"ers uncertain the amount &a#able )Section 4( N!+, )b, 5ES( Reliable inance .or&oration is a -!D. gi2en the factual settings Sai" .or&oration a&&arentl# too$ the &romissor# note for 2alue( an" there are no in"ications that it acquire" it in ba" faith 7Section 34( See Salas 2s .ourt of A&&eals( *<* S.RA 469; 11+ ,omeo %ad '1##)###+## in %is current account at Matata* BanDin* Cororation+ ,omeo learned t%at %is enemy %ad %ired a contract Diller to li6uidate %im+ Jearful of %is life) %e mailed to %is fiance) Kuliet) a c%ecD for %is '1##)###+## in t%e banD+ .%e c%ecD was ayable to Kuliet or order and was accomanied by a letter statin* t%at %e was *i?in* %er %is money out of %is *reat lo?e for %er and because somet%in* would %aen to %im anytime now+ Kuliet resented t%e c%ecD for ayment but t%e banD refused to %onor it+ oes Kuliet %a?e any ri*%t of action a*ainst t%e banD7 Because of t%e %umiliation s%e suffered from t%e banD) Kuliet broDe off %er en*a*ement wit% ,omeo+ oes ,omeo %a?e a ri*%t of action a*ainst t%e banD7 Exlain 198< Bar Examination=+ 1"+ Exlain w%et%er or not t%e followin* instrument is ne*otiable+ '1)###+## Manila) 4ctober ) 19# / acDnowled*e to %a?e recei?ed from Kose CruG one t%ousand esos ('1)###+##$ w%ic% / romise to ay on demand or in fi?e mont%s from date wit% one ercent interest er mont% ayable wit%in t%e first fi?e days of e?ery mont%+ /f t%e interest is not aid w%en due) t%en bot% rincial and
interest s%all become due at t%e otion of t%e %older+ S2@ 'edro 2arcia 19# Bar Examination=+
SUGGESTED ANSWER: )0wn answer, The instrument is N0T negotiable The instrument &ro2i"es an acceleration clause at the o&tion of the hol"er 7Section 4( N!+; urthermore( a mere ac$nowle"gment of in"ebte"ness "oes N0T constitute a &romise to &a# require" b# Section * of the N!+
1:+ Jor ?alue recei?ed) executed a romissory note in fa?or of 5 for '1#)###+## a*reein* to ay interest t%ereon but wit%out secifyin* t%e rate t%ereof+ Can 5 collect interest on t%e note7 0%y7 Exlain 19<; Bar Examination=+
SUGGESTED ANSWER: )>a"e8u& answer lang, 5ES 5 can still collect interest on the note "es&ite failure to s&ecif# the s&ecific rate to a&&l# o n the note !f there is no rate s&ecifie"( the law &ro2i"es a legal rate of 9 &er annum which ma# be a&&lie" on the note to fulfill the obligation s&ecifie"( that is to &a# the amount of the note with interest
EJE-SES C+ JA/L&,EABSE-CE 4J C4-S/E,A./41;+ /n ayment of canned *oods %e %ad urc%ased) 'edro Jlores of Cabanatuan drew a c%ecD uon '-B for '1)###+## ayable to t%e order of eraG and Co+) t%e seller in Manila+ 3e sent t%e c%ecD wit%out recourse to Kuan Santos+ .%e latter indorsed it in blanD) for consideration) to 'ablo ,eyes) w%o) in turn) sold it for '8##+##) by deli?ery to Antonio 2omeG+ .%e canned *oods were ne?er forwarded to Jlores+ 2omeG resented t%e c%ecD to t%e banD) but ayment was refused because ,eyes %ad not ut %is name on it+ /s t%e banD ri*%t in so refusin*7 0%y7 /f 2omeG *a?e due notice to eraG and Co+) may %e reco?er from t%e latter7 May 2omeG reco?er from Santos7 0%y7 May %e reco?er from ,eyes7 0%y7 19<8 Bar Examination=+
SUGGESTED ANSWER:
1+ EA issued to /MELA a c%ecD in t%e amount of '#)###+## ost!dated Setember :#) 199) as security for a diamond rin* to be sold on commission+ 4n Setember 1) 199) /MELA ne*otiated t%e c%ecD to M. /n?estment w%ic% aid t%e amount of ';#)###+## to %er+ EA failed to sell t%e rin*) so s%e returned it to /melda on Setember 19) 199+ &nable to retrie?e %er c%ecD) EA wit%drew %er funds from t%e drawee banD+ .%us) w%en M. /n?estment resented t%e c%ecD for ayment) t%e drawee banD dis%onored it+ Later on) w%en M. /n?estment sued %er) EA raised t%e defense of absence of consideration) t%e c%ecD %a?in* been issued merely as security for t%e rin* t%at s%e could not sell+ oes EA %a?e a ?alid defense7 Exlain 199<) Bar Examination=+
Suggeste" Answer: N0 E1A "oes N0T ha2e a 2ali" "efense irst( >T !n2estment is a -!D.( an"( as such( hol"s the &ost8"ate" chec$ free from an# "efect of title of &rior &arties an" from "efense a2ailable to &rior &arties among themsel2es E1A can in2o$e the "efense of absence of consi"eration against >T !n2estment 0N+5 ! the latter was &ri2# to the &ur&ose for which the chec$s were issue" an"( therefore( N0T a -!D. Secon"( it is N0T a groun" for the "ischarge of the &ost8"ate" chec$s as against a -!D. that it was issue" merel# as securit# The 0N+5 groun"s for the "ischarge of negotiable instruments are those set forth in Section **6 of the N!+ an" none of those groun"s are a2ailable to E1A The latter ma# N0T unilaterall# "ischarge herself from her liabilit# b# the mere e'&e"ienc# of with"rawing h er fun"s from the "rawee ban$ 7See State !n2estment 2s .A( et al( GR ***9F( anuar# **( *66F% 4*@ S.RA F4;
1<+ A and B executed and deli?ered to C a romissory note w%ic% reads@ / romise to ay C or bearer t%e sum of '")###+## wit% interest at 1"N er annum on or before Kune :#) 19<#+ Manila) Jebruary 1) 19<9+ S2 A and B+ .wo mont%s later) for ?alue recei?ed) C deli?ered to t%e aforesaid note wit% t%e indorsement@ 'ay to > and on Aril 1) 19<9) t%e said note was indorsed in blanD by and deli?ered to ) wit%out consideration+ &on AFs refusal to ay desite demand) filed an action to collect from A t%e total amount of t%e romissory note) wit% 1"N interest er annum from Jebruary 1) 19<9) and t%e costs+ AFs defenses are t%at t%e note is null and ?oid because t%e same was issued to ay a *amblin* debt and t%at in any e?ent) %is liability cannot exceed more t%an one!%alf of t%e amount due+ Are AFs defenses ?alid7 /s entitled to t%e w%ole amount of t%e note7 Exlain+ 19<9 Bar Examination=+
SUGGESTED ANSWER: )Sa tingin $oH, N0 There is absence of consi"eration if there is N0 consi"eration gi2en( or that the consi"eration is !++EGA+ Want of consi"eration ma# be in2o$e" as a &ersonal "efense( in this case( b# A( not unless I
is a -!D.( which in effect will not be consi"ere" as a "efense a2ailable against him ut since the instrument is a bearer instrument( I en?o#s the &rima facie &resum&tion that he is a -!D.( unless the contrar# is &ro2e" 7Section 36( N!+; 5ES I is entitle" to the whole amount of the note !n Re&ublic =lanters an$ 2s .ourt of A&&eals 7 4*9 S.RA @F<( @JJ )*664,;( an instrument which begins with B!C( BWEC or BEither of usC &romise to &a#( when signe" b# two or more &ersons( ma$es them soli"aril# liable Section *@ )g, of the N!+ also &ro2i"es that when an instrument containing wor"s B! &romise to &a#C is signe" b# two or more &ersons( the# are "eeme" to be ?ointl# an" se2erall# liable
1+ Jor t%e urose of lendin* %is name wit%out recei?in* ?alue t%erefor) 'edro maDes a note for '"#)###+## ayable to t%e order of w%o in turn ne*otiates it to 5) t%e latter Dnowin* t%at 'edro is not a arty for ?alue+ (a$ May 5 reco?er from 'edro if t%e latter interoses absence of consideration7 (b$ Suosin* under t%e same facts) 'edro ays t%e said '"#)###+##) may %e reco?er t%e same amount from 7 Exlain Question -o+ //) 1998 Bar Examination=+
SUGGESTED ANSWER: )a, 5ES 5 can reco2er from =EDR0 =EDR0 is an accommo"ation &art# Absence of consi"eration is in the nature of an accommo"ation &art# Defense of absence of consi"eration .ANN0T be 2ali"l# inter&ose" b# accommo"ation &art# against a -!D. )b, !f =EDR0 &a#s the sai" =4( to 5( =EDR0 can reco2er the amount from I I is the accommo"ate" &art# or the &art# ultimatel# liable for the instrument =EDR0 is 0N+5 an accommo"ation &art# 0therwise( it woul" be un?ust enrichment on the &art# of I if he is N0T to &a# =EDR0 SUGGESTED ANSWER )4,: )a, 5ES 5 can reco2er from =EDR0 An accommo"ation &art# is one who has signe" the instrument as ma$er( "rawer( acce&tor or in"orser( without recei2ing for 2 alue therefor( an" for the &ur&ose of len"ing his name to some other &erson Such a &erson is liable on the instrument to a hol"er for 2alue( notwithstan"ing such hol"er at the time of ta$ing the instrument $new him to be 0N+5 an accommo"ation &art# 7Section 46( N!+; urthermore( absence of consi"eration between the accommo"ation &art# an" accommo"ate" &art# "oes N0T of itself constitute a 2ali" "efense against a hol"er for 2alue e2en though he $now of it when he became a hol"er )See Ang Tiong 2 +orenKo Ting( 44 S.RA @*F% Re&ublic an$ 2s Ebra"a( 93 S.RA 9<, )b, Su&&ose" =e"ro &a#s as A=( he then becomes entitle" to be reimburse" b# the accommo"ate" &art# The relation between them is( in effect( that of a &rinci&al "ebtor an" suret#( the accommo"ation &art# in len"ing his name( being the suret# for the accommo"ate" &art#7Garcia 2s +lamas( J*@ S.RA 464 )4F,;
18+ -ora alied for a loan of '1##)###+## wit% B&, BanD+ By way of accommodation) -oraFs sister) ilma) executed a romissory note in fa?or of B&, BanD+ 0%en -ora defaulted) B&, BanD sued ilma) desite its Dnowled*e t%at ilma recei?ed no art of t%e loan+ (a$ May ilma be %eld liable7 Exlain 199< Bar Examination=+
SUGGESTED ANSWER: 5ES 1!+>A ma# be hel" liable as an accommo"ation &art#( sub?ect to her right to be reimburse" from N0RA( the accommo"ate" &art# An accommo"ation &art# is one who has signe" the instrument as ma$er( "rawer( acce&tor or in"orser( without recei2ing for 2alue therefor( an" for the &ur&ose of len"ing his name to some other &erson Such a &erson is liable on the instrument to a hol"er for 2alue( notwithstan"ing such hol"er at the time of ta$ing the instrument $new him to be 0N+5 an accommo"ation &art# 7Section 46( N!+; As an acce&tor( he affirms the genuineness of the negotiable instrument -ence( she ma# be hel" liable( sub?ect to her right to reco2er from the accommo"ate" &art# for reimbursement 19+ Santos urc%ased eraFs car for '#)###+##+ -ot %a?in* enou*% cas% on %and) Santos offered to ay in c%ecD+ era refused to accet t%e c%ecD unless it is indorsed by ,eyes) t%eir mutual friend+ ,eyes indorsed SantosF c%ecD and era) Dnowin* t%at ,eyes %ad not recei?ed any ?alue for indorsin* t%e c%ecD) acceted it+ .%e next day) era resented t%e c%ecD to t%e drawee banD for ayment+ 'ayment was refused for lacD of funds+ era *a?e notice of dis%onor to ,eyes) but ,eyes refused to ay) sayin* t%at %e indorsed merely as a friend+ (a$ /s ,eyes liable to era7 (b$ /n t%e e?ent ,eyes ?oluntarily ays era) does ,eyes %a?e t%e ri*%t to reco?er from Santos7 Exlain 198 Bar Examination=+
SUGGESTED ANSWERS: )a, 5ES Re#es is liable to 1era An accommo"ation &art# is one who has signe" the instrument as ma$er( "rawer( acce&tor or in"orser( without recei2ing for 2alue therefor( an" for the &ur&ose of len"ing his name to some other &erson Such a &erson is liable on the instrument to a hol"er for 2alue( notwithstan"ing such hol"er at the time of ta$ing the instrument $new him to be 0N+5 an accommo"ation &art# 7Section 46( N!+; )b, 5ES Re#es ma# reco2er from the accommo"ate" &art# for reimbursement )Solutio !n"ebitiL, + /-C4M'LE.E EL/E,E /-S.,&ME-. "#+ Larry issued a ne*otiable romissory note to E?elyn and aut%oriGed t%e latter to fill u t%e amount in blanD wit% %is loan account in t%e sum of '1)###+##+ 3owe?er) E?elyn inserted ')###+## in ?iolation of t%e instruction+ S%e ne*otiated t%e note to Kulie w%o %ad Dnowled*e of t%e infirmity+ Kulie) in turn) ne*otiated said note to e?i for ?alue and w%o %ad no Dnowled*e of t%e infirmity+ (a$ Can e?i enforce t%e note a*ainst Larry) and if s%e can) for %ow muc%7
(b$ Suosin* e?i indorses t%e note to Baby for ?alue but w%o %as Dnowled*e of t%e infirmity) can t%e latter enforce t%e note a*ainst Larry7 Exlain 199: Bar Examination=+
SUGGESTED ANSWER: )a, 5ES DE1! can enforce the Negotiable =N against +ARR5 in the amount of =3( DE1! is a -!D. an" the breach of trust committe" b# E1E+5N cannot be set u& b# +ARR5 against DE1! because it is a &ersonal "efense As -!D.( DE1! is N0T sub?ect to such &ersonal "efense The "efense that the instrument ha" N0T been fille" u& in accor"ance with the authorit# gi2en an" within a reasonable time is N0T a2ailable as "efense against a -!D. )b, 5ES A5 is N0T a -!D. because she ha" $nowle"ge of the breach of trust committe" b# E2el#n against +ARR5 which is ?ust a &ersonal "efense ut ha2ing ta$en the instrument from DE1!( a -!D.( A5 has A++ the rights of a -!D. A5 "i" N0T &artici&ate in the breach of trust committe" b# E2el#n who fille" the blan$ but fille" u& the instrument with =3( instea" of =*( as instructe" b# +arr# 7Section 3<( N!+; "1+ Maria issued a ne*otiable romissory note and aut%oriGed 'ilar to fill!u t%e amount in blanD u to '")###+##+ 3owe?er) 'ilar filled it u to ';)###+## and ne*otiated t%e note to 'ee+ (a$ Jor w%at amounts are Maria and 'ilar liable to 'ee7 Exlain 19" Bar Examinations=+
SUGGESTED ANSWER: )a, Where the instrument is wanting in an# material &articularit#( the &erson in &ossession thereof has the &rima facie authorit# to com&lete it b# filling u& the blan$s therein A" a signature on the blan$ &a&er "eli2ere" b# the &erson ma$ing the signature in or"er that the &a&er ma# be con2erte" into a negotiable instrument o&erates as a &rima facie authorit# to fill it u& as such for an# amount !n or"er( howe2er( that an# such instrument( when com&lete"( ma# be enforce" against an# &erson who became a &art# thereto &rior to its com&letion( it must be fille" u& strictl# in accor"ance with the authorit# gi2en an" within reasonable time UT if an# such instrument( ATER com&letion( is negotiate" to a -!D.( it is 2ali" an" effectual for all &ur&oses in his han"s( an" he ma# enforce it AS ! it ha" been fille" u& strictl# in accor"ance with the authorit# gi2en an " within a reasonable time (Section 1;) -/L$ !f =e&e is a -!D.( >aria an" =ilar is liable for =J( !f not( the# are liable base" on the authorit# gi2en( which is for =4(
E+ /-C4M'LE.E &-EL/E,E /-S.,&ME-. ""+ '- maDes a romissory note for ')###+##) but lea?es t%e name of t%e ayee in blanD because %e wanted to ?erify its correct sellin* first+ 3e mindlessly left t%e note on to of %is desD at t%e end of t%e worDday+ 0%en %e returned t%e followin* mornin*) t%e note was missin*+ /t turned u later w%en resented it to '- for ayment+ Before ) .) w%o turned out to %a?e filc%ed t%e note from '-Fs office) %ad endorsed t%e note after insertin* %is own name in t%e blanD sace as t%e ayee+ '- dis%onored t%e note) contendin* t%at %e did not aut%oriGe its comletion and deli?ery+ But said %e %ad no articiation in) or Dnowled*e about) t%e ilfera*e and alteration of t%e note
and t%erefore %e enHoys t%e ri*%ts of a %older in due course under t%e -e*otiable /nstruments Law+ 0%o is correct and w%y7 "### Bar Examination=+
SUGGESTED ANSWER: )See &re2ious answers, =N is correct Where an instrument has N0T been "eli2ere"( it will N0T( if com&lete" an" negotiate" W!T-0UT AUT-0R!T5( be a 1A+!D .0NTRA.T in the han"s of AN5 -0+DER( as against an# &erson whose signature was &lace" thereon before "eli2er# 7Section *3( N!+; This is a "efense e2en against a -!D. A real "efense e'ists an" =N ma# treat the instrument as a forger# 7Section 4F( N!+;
":+ Kose maDes a ne*otiable note ayable to bearer wit% t%e amount in blanD and deli?ers it to aren for safeDeein*+ Marina fills u t%e note for '"#)###+## and ne*otiates it to Adriano) a %older in due course+ /f you were Kose and Adriano resented to you t%e note for ayment) w%at defense or defenses are you *oin* to interose to ne*ate liability on t%e instrument7 Exlain 1981 Bar Examinations=+
SUGGESTED ANSWER: )!f ! were to answer this questionH, !f ! were ose( ! will in2o$e a real "efense for want of authorit# which ren"ers the instrument in2ali" in the han"s of AN5 -0+DER )Section *3 an" 4F( N!+, ! will allege that the instrument was "eli2ere" to aren for safe$ee&ing( ren"ering the instrument as one that is un"eli2ere"( an" was com&lete" an" negotiate" b# >arina without authorit# to "o so An incom&lete an" un"eli2ere" instrument will not( e2en if com&lete" an" negotiate" without authorit#( be a 2ali" contract in the han"s of AN5 -0+DER( inclu"ing a -!D.
";+ A entrusted to B) %is secretary) a blanD c%ecD drawn on banD) si*ned by %im) wit% instructions to fill u t%e c%ecD in fa?or of for t%e amount of '1)###+## and to t%ereafter deli?er t%e said c%ecD to + /n breac% of trust) B filled u t%e c%ecD by writin* t%e name of E) and t%e amount of '")###+## on t%e c%ecD and deli?ered t%e same to E) w%o acceted it in ayment of certain *oods sold by E to B+ Before E could encas% t%e c%ecD) A learned of t%e misdeed of B and issued a sto!ayment order to banD as a result of w%ic% banD refused to %onor t%e c%ecD resented to it by E+ Can E now %old banD and A liable7 ,eason 191 Bar Examinations=+
SUGGESTED ANSWER: N0 E cannot hol" I ban$ liable A DRAWEE is N0T liable until an" unless he acce&ts the instrument in which case( I ban$ becomes an acce&tor 7Section *<@( N!+; I an$Ms "ut#( as the DRAWEE ban$ in this case( is but to 2erif# the genuineness of the "rawers signature an" not of the in"orsement because the "rawer is its client )Associate" an$ 2s -on .ourt of A&&eals( =ro2ince of Tarlac an" =hili&&ine National an$( GR No *@9*4( anuar# F*( *669, -e cannot also hol" A liable because Section *3 &ro2i"es that an incom&lete an" un"eli2ere" instrument will not( e2en if com&lete" an" negotiate" without authorit#( be a 2ali" contract in the han"s of AN5 -0+DER( e2en against a -!D.
"+ Kose ,eyes si*ned a blanD c%ecD) and in %is %asted to attend a arty) left t%e c%ecD on to of %is executi?e desD in %is office+ Later) -aGareno forced t%e door to ,eyesF office and stole t%e blanD c%ecD+ -aGareno immediately filled in t%e amount of '#)###+## and a fictitious name as ayee on t%e said c%ecD+ -aGareno t%en endorsed t%e c%ecD in t%e ayeeFs name and assed it to ,oldan+ .%ereafter) ,oldan endorsed t%e c%ecD to antes+ (a$ Can antes enforce t%e c%ecD a*ainst Kose ,eyes7 (b$ /f antes is a %older in due course) will your answer be t%e same7 198 Bar Examinations=+
SUGGESTED ANSWER: )a, N0 Where an incom&lete instrument has N0T been "eli2ere"( it will N0T( if com&lete" an" negotiate" without authorit#( be a 2ali" contract in the han"s of AN5 -0+DER( as against an# &erson whose signature was &lace" thereon E0RE "eli2er# 7Section *3( N!+; )b, Section *3 which &ro2i"es for an incom&lete an" un"eli2ere" instrument that is com&lete" an" negotiate" without authorit# effects as a real "efense e2en a gainst a -!D. "<+ A si*ned a blanD c%ecD w%ic% %e inad?ertently left at %is desD at %is Escolta 4ffice+ .%e same was later stolen by B) w%o filled in t%e amount of '""):##+## and a fictitious name as ayee+ B t%en endorsed t%e c%ecD in t%e ayeeFs name and assed t%e c%ecD to C> t%ereafter C assed it to > t%en to E> and E to J+ Can J enforce t%e instrument a*ainst A7 Suose t%at J is a %older in due course) w%at will be your answer7 Can J enforce t%e instrument a*ainst B7 A*ainst C+ 2i?e reasons 198 Bar Examinations=+
J+ J4,2E,5 "+ A deli?ers a bearer instrument to B+ B t%en secially indorses it to C) and C later indorses it in blanD to + E steals t%e instrument from and) for*in* t%e si*nature of ) succeeds in ne*otiatin* it to J w%o ac6uires t%e instrument in *ood fait% and for ?alue+ (a$ /f) for any reason) t%e drawee banD refuses to %onor t%e c%ecD) can J enforce t%e instrument a*ainst t%e drawer7 (b$ /n case of t%e dis%onor of t%e c%ecD by bot% t%e drawee and t%e drawer) can J %old any of B) C and liable secondarily on t%e instrument7 199 Bar Examinations=+
SUGGESTED ANSWER: )a, 5ES The instrument was &a#able to bearer as it was a bearer instrument !t coul" be negotiate" b# mere "eli2er# "es&ite the &resence of s&ecial in"orsements The forge" signature is N0T necessar# to &resume the ?uri"ical relation between an" among the &arties =R!0R to the forger# an" &arties ATER the forger# The 0N+5 &art# who can raise the "efense of forger# against a -!D. is the &erson whose signature is forge" 7A&&l# Section *9 o f the N!+ in this case since the cut8off rule will N0T a&&l# in case of a bearer instrument;
)b, 0nl# an" . can be hel" liable b# The instrument at the time of the forger# was &a#able to bearer( being a bearer instrument >oreo2er( the signature was in"orse" in blan$ b# . to D D( whose signature was forge" b# E .ANN0T be hel" liable b#
When a signature is forge" or ma"e without the authorit# of the &erson whose signature it &ur&orts to be( it is wholl# ino&erati2e( an" N0 right to retain the instrument( or to gi2e a "ischarge" therefor( or to enforce &a#ment thereof( against an# &art# thereto( can be acquire" through or un"er such signature UN+ESS the &art# against whom it is sought to enforce such right is &reclu"e" from setting u& the forger# or want of au thorit# 7Section 4F( N!+; As general in"orser( he warrants that )a, the instrument is GENU!NE an" in all res&ects what it &ur&orts to be% )b, that he has a G00D title to it% )c, that all &rior &arties ha" .A=A.!T5 to contract% an" )", that the instrument is( at the time of his in"orsement( 1A+!D an" SUS!ST!NG !n a""ition( he engages that( on "ue &resentment( it shall be acce&te" or &ai"( or both( as the case ma# be( accor"ing to the tenor( an" that if it be "ishonore" an" the necessar# to &rocee"ings on "ishonor be "ul# ta$en or to an# subsequent in"orser who ma# be com&elle" to &a# it )Section 99( N!+, "8+ Kuan maDes a romissory note ayable to %is order) si*nin* 'edroFs name t%ereon as maDer wit%out 'edroFs Dnowled*e and consent+ Kuan t%en indorses t%e note to Kose) w%o) in turn) indorses it to Carlos under circumstances w%ic% maDe Carlos a %older in due course+ (a$ May Carlos enforce t%e note a*ainst 'edro7 (b$ And if t%e note is dis%onored by 'edro) may Carlos %old Kuan and Kose liable on t%eir resecti?e indorsements7 ,eason out your answers 1989 Bar Examinations=+
SUGGESTED ANSWER: )! thin$H, )a, N0 .arlos ma# N0T enforce the note against =e"ro When a signature is forge" or ma"e without the authorit# of the &erson whose signature it & ur&orts to be( it is wholl# ino&erati2e( an" N0 right to retain the instrument( or to gi2e a "ischarge" therefor( or to enforce &a#ment thereof( against AN5 &art# thereto( can be acquire" through or un"er such signature UN+ESS the &art# against whom it is sought to enforce such right is &reclu"e" from setting u& the forger# or want of authorit# 7Section 4F( N!+; )b, 5ES UAN AND 0SE ma# be hel" liable on the note as general in"orsers for breach of warranties As in"orsers( the# warrant that )a, the instrument is GENU!NE an" in all res&ects what it &ur&orts to be% )b, that he has a G00D title to it% )c, that all &rior &arties ha" .A=A.!T5 to contract% an" )", that the instrument is( at the time of his in"orsement( 1A+!D an" SUS!ST!NG !n a""ition( he eng ages that( on "ue &resentment( it shall be acce&te" or &ai"( or both( as the case ma# be( accor"ing to the tenor( an" that if it be "ishonore" an" the necessar# to &rocee"ings on "ishonor be "ul# ta$en or to an# subsequent in"orser who ma# be com&elle" to &a# it )Section 99( N!+, "9+ Kuan maDes a romissory note ayable to t%e order of 'edro) w%o indorses it to Kose+ Some%ow) ,oberto obtains ossession of t%e note and) for*in* t%e si*nature of Kose) indorses it to Amado+ Amado t%en indorses t%e note to -ilo) t%e %older+
State t%e ri*%ts and liabilities of t%e arties 198; Bar Examinations=+
SUGGESTED ANSWER:
:#+ A maDes a ne*otiable romissory note ayable to B or bearer+ A deli?ers t%e note to B+ B indorses t%e note to C+ C laces t%e note in %is wallet) w%ic% was stolen by ) w%o) findin* t%e note) indorses it to by forcin* CFs si*nature+ indorses t%e note to E) w%o in turn) deli?ers t%e note to J) a %older in due course) wit%out indorsement+ 0%at are t%e liabilities of A) B and C to J+ Exlain briefly 1981 Bar Examinations=+
SUGGESTED ANSWER: :1+ Kuan de la CruG si*ns a romissory note ayable to 'edro Lim or bearer) and deli?ers it ersonally to 'edro Lim+ .%e latter some%ow mislaces t%e said note and Carlos ,os finds t%e note lyin* around t%e corridor of t%e buildin*+ Carlos ,os endorses t%e romissory note to Kuana Bond) for ?alue) by for*in* t%e si*nature of 'edro Lim+ May Kuana Bond %old Kuan de la CruG liable on t%e note7 Exlain 198# Bar Examinations=+
SUGGESTED ANSWER: 5ES UANA 0ND ma# hol" UAN DE +A .RU liable on the note UANA( as a hol"er for 2alue( ma# collect on the note The instrument was &a#able to bearer as it was a bearer instrument !t coul" be negotiate" b# mere "eli2er# "es&ite the &resence of s&ecial in"orsements The forge" signature is N0T necessar# to &resume the ?uri"ical relation between an" among the &arties =R!0R to the forger# an" &arties ATER the forger# The 0N+5 &art# who can raise the "efense of forger# against a -!D. is the &erson whose signature is forge"( as in this case is =EDR0 +!> orger# is a real "efense e2en against a -!D. 7A&&l# Section *9 of the N!+ in this case since the cut8off rule will N0T a&&l# in case of a bearer instrument;
:"+ Jernando for*ed t%e name of aniel) mana*er of a .radin* Comany) as t%e drawer of a c%ecD+ .%e BanD of '%iliine /slands) t%e drawee banD) did not detect t%e for*ery and aid t%e amount+
May t%e banD c%ar*e t%e amount aid a*ainst t%e account of t%e alle*ed drawer7 Exlain 19 Bar Examinations=+
SUGGESTED ANSWER: N0 The ban$ on which a chec$ is "rawn( $nown as the "rawee ban$( is un"er strict liabilit# to &a# the chec$ to the or"er of the &a#ee The "rawers instructions are reflecte" on the face an" b# the terms of the chec$ =a#ment un"er a forge" in"orsement is not to the "rawers or"er When the "rawee ban$ &a#s a &erson other than the &a#ee( it "oes not com&l# with the terms of the chec$ an" 2iolates its "ut# to charge its customers )the "rawer, account onl# for &ro&erl# &a#able items Since the "rawee ban$ "i" not &a# a hol"er or other &erson entitle" to recei2e &a#ment( it has no right to reimbursement from the "rawer The general rule then is that the "rawee ban$ ma# not "ebit the "rawers account an" is not entitle" to in"emnification from the "rawer The ris$ of loss must &erforce fall on the "rawee ban$ )Associate" an$ 2s -on .ourt of A&&eals( =ro2ince of Tarlac an" =hili&&ine National an$( GR No *@9*4( anuar# F*( *669, -owe2er( if the "rawee ban$ can &ro2e a failure b# the customer/"rawer to e'ercise or"inar# care that substantiall# contribute" to the ma$ing of the forge" signature( the "rawer is &reclu"e" from asserting the forger# !n cases in2ol2ing a forge" chec$( where the "rawerOs signature is forge"( the "rawer can reco2er from the "rawee ban$ No "rawee ban$ has a right to &a# a forge" chec$ !f it "oes( it shall ha2e to recre"it the amount of the chec$ to the account of the "rawer The liabilit# chain en"s with the "rawee ban$ whose res&onsibilit# it is to $now the "rawerOs signature since the latter is its customer
2+ J,A& ::+ A succeeded in maDin* B affix %is si*nature on a c%ecD wit%out BFs Dnowin* t%at it was a c%ecD+ At t%e time of si*nin*) t%e c%ecD was comlete in all resects+ A intended to cas% t%e c%ecD t%e followin* mornin*) but t%at ni*%t) it was stolen by C w%o succeeded in ne*otiatin* t%e same to ) a %older in due course+ cas%ed t%e c%ecD t%e followin* mornin*+ B refused to %a?e t%e amount of t%e c%ecD deducted from %is banD deosit+ 0%o may roerly be c%ar*ed wit% t%e amount of t%e c%ecD7 Exlain your answer 19<1 Bar Examinations=+ :;+ A induces B by fraud to maDe a romissory note ayable on demand to t%e order of A in t%e sum of ')###+##+ Can A file an action successfully a*ainst t%e maDer B for t%e amount of t%e note7 ,easons+ 2oin* furt%er) A transfers t%e note to C w%o ays ')###+## t%erefor and ac6uires t%e note under circumstances t%at maDe %im (C$ as %older in due course+ Can C file an action successfully a*ainst B) t%e maDer of t%e note) for t%e amount of t%e note7 0%at defensedefenses can B interose7 Exlain 198 Bar Examinations=+
3+ MA.E,/AL AL.E,A./4:+ A c%ecD for '#)###+## was drawn a*ainst drawee banD and made ayable to 5O MarDetin*
or order+ .%e c%ecD was deosited wit% ayeeFs account at ABC BanD w%ic% t%en sent t%e c%ecD for clearin* to drawee banD+ rawee banD refused to %onor t%e c%ecD on t%e *round t%at t%e serial number t%ereof %ad been altered+ 5O MarDetin* sued drawee banD+ (a$ /s it roer for t%e drawee banD to dis%onor t%e c%ecD for t%e reason t%at it %ad been altered7 (b$ /n instant suit) drawee banD contended t%at 5O MarDetin* as ayee could not sue t%e drawee banD as t%ere was no ri?ity between t%em+ rawee t%eoriGed t%at t%ere was no basis to maDe it liable for t%e c%ecD+ /s t%is contention correct7 Exlain 1999 Bar Examinations=+
SUGGESTED ANSWER: (a) N0 The serial number is N0T a material &articular of the chec$ !ts alteration "oes N0T
constitute material alteration of the instrument The serial number is N0T material to the negotiabilit# of the instrument (b) 5ES As a general rule( the DRAWEE is N0T liable un"er the chec$ because there is N0
=R!1!T5 of contract between I5 >ar$eting( as =A5EE( an" A. an$ as the "rawer ban$ -owe2er( if the action ta$en b# the ban$ is an abuse of right which cause" "amage N0T 0N+5 to the issuer of the chec$ UT A+S0 to the =A5EE( the =A5EE has the cause of action un"er PUAS!8DE+!.T PUAS!8DE+!.T: Art 4*@9 Whoe2er b# act or omission causes "amage to another( there being fault or negligence( is oblige" to &a# for the "amage "one Such fault or negligence( if there is no &re8e'isting contractual relation between the &arties( is calle" a quasi8"elict an" is go2erne" b# the &ro2isions of this .ha&ter )*64a, :<+ 0illiam issued to Albert a c%ecD for '1#)###+## drawn on M BanD+ Albert altered t%e amount of t%e c%ecD to '"1#)###+## and deosited t%e c%ecD to %is account wit% - BanD+ 0%en - BanD resented t%e c%ecD for ayment t%rou*% t%e Clearin* 3ouse) M BanD %onored it+ .%ereafter) Albert wit%drew t%e amount of '"1#)###+## and closed %is account+ 0%en t%e c%ecD was returned to %im after a mont%) 0illiam disco?ered t%e alteration+ M BanD recredited '"1#)###+## to 0illiamFs current account and sou*%t reimbursement from - BanD+ - BanD refused) claimin* t%at M BanD failed to return t%e altered c%ecD wit%in t%e "; %our clearin* eriod+ 0%o) as between M BanD and - BanD) s%ould bear t%e loss7 Exlain 199< Bar Examinations=+
SUGGESTED ANSWER: ND an$ shoul" bear the loss if I> an$ returns the altere" chec$ to ND an$ within 4J hours after its "isco2er# of the alteration n Un"er the gi2en facts( William "isco2ere" the alteration when the altere" chec$ was returne" to him after a month !t ma# safel# be assume" that William imme"iatel# a"2ise"
I> an$ of such fact an" that the latter &rom&tl# notifie" ND an$ thereafter .entral an$ .ircular No 6( as amen"e" on which the "ecision of the Su&reme .ourt in the -ong$ong Q Shanghai an$ing .or&oration 2s =eo&leMs an$ Q Trust .o( an" Re&ublic an$ 2s .A( et al were base" was e'&ressl# cancelle" an" su&erse"e" b# .entral an$ .ircular No F*@( "ate" December 4F( *6@ The latter was in turn amen"e" b# .entral an$ .ircular No 3<( "ate" Se&tember *6( *6@@ As to altere" chec$s( the new rule &ro2i"es that the "rawee ban$ can still return them e2en after J:=> of the ne't "a# &ro2i"e" it "oes so within 4J hours from the "isco2er# of the alteration but in no e2ent be#on" the &erio" fi'e" or &ro2i"e" b# law for filing of a legal action b# the returning ban$ against the ban$ sen"ing the same Assuming that the relationshi& between the "rawee ban$ an" the collecting ban$ is e2i"ence" b# some written "ocument( the &rescri&ti2e &erio" woul" be * #ears A+TERNATE ANSWER: I> AN shoul" bear the loss When the "rawee ban$ )I> AN, faile" to return the altere" chec$ to the collecting ban$ )ND an$, within 4J hour clearing &erio" &ro2i"e" in Section J)c, of the .entral an$ .ircular No 6 "ate" ebruar# *@( *6J6( the latter is absol2e" from liabilit# )See -ong$ong Q Shanghai an$ing .or&oration 2s =eo&leMs an$ Q Trust .o( GR +84<449( Se&tember F( *6@% F3 S.RA *J% also Re&ublic an$ 2s .A( et al GR J4@4 3( A&ril 44( *66*% *69 S.RA *, 0R >ore im&ortantl#( b# reason of the statutor# warrant# of a general in"orser in Section 99 of the Negotiable !nstruments +aw( a collecting ban$ which in"orses a chec$ bearing a forge" in"orsement an" &resents it to the "rawee ban$ guarantees all &rior in"orsements( inclu"ing the forge" in"orsement !t warrants that the instrument is genuine( an" that it is 2ali" an" subsisting at the time of his in"orsement ecause the in"orsement is a forger#( the collecting ban$ commits a breach of this warrant# an" will be accountable to the "rawee ban$ This liabilit# scheme o&erates without regar" to fault on the &art of the collecting/&resenting ban$ E2en if the latter ban$ was not negligent( it woul" still be liable to the "rawee ban$ because of its in"orsement The .ourt has consistentl# rule" that the collecting ban$ or last en"orser generall# suffers the loss because it has the "ut# to ascertain the genuineness of all &rior en"orsements consi"ering that the act of &resenting the chec$ for &a#ment to the "rawee is an assertion that the &art# ma$ing the &resentment has "one its "ut# to ascertain the genuineness of the en"orsements >oreo2er( the collecting ban$ is ma"e liable because it is &ri2# to the "e&ositor who negotiate" the chec$ The ban$ $nows him( his a""ress an" histor# because he is a client !t has ta$en a ris$ on his "e&osit The ban$ is also in a better &osition to "etect forger#( frau" or irregularit# in the in"orsement The "rawee ban$ is not similarl# situate" as the collecting ban$ because the former ma$es no warrant# as to the genuineness of an# in"orsement The "rawee ban$s "ut# is but to 2erif# the genuineness of the "rawers signature an" not of the in"orsement because the "rawer is its client )Associate" an$ 2s -on .ourt of A&&eals( =ro2ince of Tarlac an" =hili&&ine National an$( GR No *@9*4( anuar# F*( *669,
:+ /n consideration of some *oods %e bou*%t) A issued to B a ersonal c%ecD in t%e amount of '"8#+## w%ic% B altered to '")8##+## wit%out t%e Dnowled*e of A+ .%e alteration is not aarent
to t%e naDed eye+ B t%en deosited t%e altered c%ecD in %is account wit% '-B) w%ic% released it for clearin*+ .%e B'/) t%e drawee banD) did not notice t%e alteration and t%e c%ecD t%erefore cleared+ B was able to wit%draw t%e '")8##+##) after w%ic%) %e closed %is account+ 0%en A recei?ed %is banD statement and cancelled c%ecDs) %e noticed t%e discreancy in t%e amount w%en %e comared t%e altered c%ecD wit% %is c%ecD stub+ 3e immediately notified B'/ and demanded a recredit+ B'/) in turn) demanded recredit from '-B w%ic% cannot now locate B+ Can A comel B'/ to recredit %is account7 /f so) %ow muc%7 Can '-B be comelled to reimburse B'/ of t%e amount t%e latter may %a?e recredit to t%e account of A7 Exlain 198< Bar Examinations=+ :8+ 'edro writes out a c%ecD for '1)###+## in fa?or of Kose or order a*ainst %is current account wit% t%e BanD of America+ Kuan steals t%e c%ecD) erases t%e name of Kose and suerimoses %is own name+ Kuan deosits t%e c%ecD at CitibanD and after clearin*) Kuan wit%draws t%e amount and absconds+ &on disco?ery by 'edro of t%e material alteration) %e lod*ed a comlaint at t%e BanD of America) w%o debited t%e amount to 'edro+ BanD of America demands reimbursement for CitibanD w%ic% refuses on t%e *round t%at it only acted as an a*ent for collection+ 0%o bears t%e loss7 0%y7 19 Bar Examinations=+ :9+ Maria issued a ne*otiable romissory note and aut%oriGed 'ilar to fill u t%e amount in blanD u to '")###+## only+ 3owe?er) 'ilar filled it u to ';)###+## and ne*otiated t%e note to 'ee+ Jor w%at amount are Maria and 'ilar liable to 'ee7 Exlain 19" Bar Examinations=+ ;#+ A executed a bill of exc%an*e for '##+## in fa?or of B) w%o altered t%e amount to ')###+## and resented t%e bill to t%e drawee for accetance+ .%e drawee) not Dnowin* of t%e alteration w%ic% was neatly done) acceted t%e bill+ .%ereafter) - ne*otiated t%e bill to C) w%o now seeDs to %old t%e drawee liable for ')###+##+ .%e drawee contends t%at under t%e rule on alteration) %e can only be liable u to '##+##+ /s t%e draweeFs contention tenable7 Can t%e drawee debit t%e amount of A) and if so) to w%at extent7 ,easons 191 Bar Examinations=+ /+ M/-4,/.5 ;1+ maDes a romissory note for '1#)###+## ayable to A) a minor) to %el %im to buy sc%ool booDs+ A endorses t%e note to B for ?alue) w%o in turn endorses t%e note to C+ C Dnows A is a minor+ /f C sues on t%e note) can set u t%e defenses of minority and lacD of consideration7 Exlain 1998 Bar Examinations=+ ;"+ ) wit%out recei?in* consideration t%erefor) maDes a romissory note for '##+## ayable to A) a minor) to %el %im buy sc%ool booDs+ A indorses t%e note to B) w%o) in turn) indorses t%e note to C+ C Dnows AFs minority+ /f C resents t%e note to for ayment) w%at are t%e ossible defenses to be interosed by 7 /f C sues on t%e note) can set u t%e defense of minority and lacD of consideration7 Exlain 1989 Bar Examinations=+
0A,,A-./ESL/AB/L/./ES K+ ACCE'.4,
;:+ draws a c%ecD a*ainst %is current account wit% 4rti*as Branc% of Bonifacio BanD in fa?or of B+ Alt%ou*% does not %a?e sufficient funds) t%e banD %onors t%e c%ecD w%en it was resented to ayment+ Aarently) %as consired wit% t%e banDFs booDDeeer so t%at %is led*er card would s%ow t%at %e still %as sufficient funds+ .%e banD files an action for reco?ery of t%e amount aid to B because t%e c%ecD resented %as no sufficient funds+ ecide t%e case 1998 Bar Examinations=+
+ -E24./A.4, B5 EL/E,5 ;;+ Anna maDes a romissory note ayable to bearer and deli?ers it to Bin*+ /n turn) Bin* ne*otiates it by mere deli?ery to Carmen) w%o indorses it secially to on*+ on* ne*otiates it by secial indorsement to Emma) w%o ne*otiates it to Je by mere deli?ery+ Anna did not ay+ .o w%om are Bin* and Carmen liable7 .o w%om are on* and Emma liable7 Exlain 1988 Bar Examinations=+
L+ /-4,SE,S ;+ Alex issued a ne*otiable romissory note ('-$ ayable to Benito or order in ayment of certain *oods+ Benito indorsed t%e '- to Celso in ayment of an existin* obli*ation+ Later) Alex found t%e *oods to be defecti?e+ 0%ile in CelsoFs ossession) t%e '- was stolen by ennis w%o for*ed CelsoFs si*nature and discounted it wit% Ed*ar) a money lender w%o did not maDe in6uiries about t%e '-+ Ed*ar indorsed t%e '- to Jelix) a %older in due course+ 0%en Jelix demanded ayment of t%e 'from Alex) t%e latter refused to ay+ ennis could no lon*er be located+ 0%at are t%e ri*%ts of Jelix) if any) a*ainst Alex) Benito) Celso and Ed*ar7 Exlain+ oes Celso %a?e any ri*%t of action a*ainst Alex) Benito and Jelix7 Exlain 199 Bar Examinations=+ ;<+ A drew a c%ecD for '1)###+## on B) t%e BanD ayable to t%e order of C and deli?ered t%e c%ecD to t%e latter for ?alue+ C indorsed t%e c%ecD in blanD and ne*otiated it to ) w%o lost it+ At Fs re6uest) A ordered ayment stoed by notifyin* B+ .%e sto ayment order was o?erlooDed and t%e c%ecD was aid to E) w%o %ad taDen t%e c%ecD) wit%out actual Dnowled*e of t%e loss) in ayment of merc%andise sold to a stran*er w%om %e t%ou*%t owned t%e c%ecD+ now sues t%e banD+ ecide t%e case wit% brief reasons 199 Bar Examinations=+
/-C/E-.S M+ -E24./A./4;+ ,ic%ard Clinton maDes a romissory note ayable to bearer and deli?errs t%e same to Autora 'a*e+ .%e latter) %owe?er) endorses it to in t%is manner@ 'ayable to ) Si*ned@ Aurora 'a*e+ Later) ) wit%out endorsin* t%e romissory note) transfers and deli?ers t%e same to -aoleon+ .%e note is subse6uently dis%onored by ,ic%ard Clinton+ May -aoleon roceed a*ainst ,ic%ard Clinton for t%e note7 1998 Bar Examinations=+
;8+ 4n -o?ember :) as ayment for *oods recei?ed) A *a?e to B %is c%ecD drawn on '-B) Manila+ B t%ereafter ne*otiated t%e c%ecD to C+ 4n -o?ember 1#) C could not encas% t%e c%ecD because t%e Ban*Do Sentral %ad forbidden '-B to do business on *rounds of insol?ency+ Can C %old A liable on t%e uncas%ed c%ecD7 Can C %old B liable instead on t%e uncas%ed c%ecD7 Exlain+ /f you were B) %ow would you ne*otiate t%e c%ecD to ne*ate future liability t%ereon7 Exlain 198 Bar Examinations=+
-+ /S34-4, ;9+ 0%en is notice of dis%onor not re6uired to be *i?en to t%e drawer7 Q&ES./4- -4+ 1) 199<) Bar Examinations=+
SUGGESTED ANSWER: Notice of "ishonor is N0T require" to be gi2en to the "rawer in an# of the following cases: a Where the "rawer )R, an" Drawee )W, are the same &erson% b When the )W, is a fictitious &erson or a &erson N0T ha2ing ca&acit# to contract% c When the )R, is a &erson to whom the instrument is &resente" for &a#ment% " Where the )R, has N0 right to e'&ect or require that the )W, or A..E=T0R )A, will honor the instrument #+ A issued a romissory note to B dated Kanuary 1) "##") in t%e followin* tenor@ / romise to ay to t%e order of B '1)###+## sixty days after date+ (S*d+$ A+ .%e note was subse6uently ne*otiated wit% roer indorsement by B to C) C to ) and to E) t%e %older+ 0%en E resented t%e note for ayment to A) t%e latter refused to ay+ E t%en *a?e a notice of dis%onor to C only+ May E immediately roceed a*ainst B) C or 7 0%at s%ould C do to rotect %is ri*%ts) if any) a*ainst A) B and 7 Exlain 198; Bar Examinations=+ 1+ draws a bill of exc%an*e a*ainst 5 in fa?or of 0 for '1)###+##) re6uestin* t%e drawee to ay on ecember ";) 19<"+ 0 indorses t%e instrument to ' on Setember 1 and on Setember 1 resents it for accetance+ .%e bill is dis%onored+ ' romtly sues 0 for ayment+ 0ill t%e case roser7 2i?e reasons for your answer 19<: Bar Examinations=+