Course Outline Atty. Joanne L.

Ranada
Negotiable Instruments Law First Semester, AY 2019 - 2020

I. INTRODUCTION

1. History; Governing Laws

2. Applicability of the Law

Kauffman vs PNB (42 Phil 182, 29 September 1921)

GSIS vs. CA (170 SCRA, 23 February 1989)

II. GENERAL PRINCIPLES

1. Concept of negotiable instruments

a. Definition

Negotiable Instrument vs Legal Tender

b. Functions

Tibajia vs. CA (223 SCRA 163)

PAL vs CA (GR No. 49188, 30 January 1990)

c. Characteristics of negotiable instruments

d. Incidents in the life of a negotiable instrument

e. Kinds of negotiable instruments

1. Negotiable Promissory Notes (Sec. 184, NIL)

i. Kinds of negotiable promissory notes

ii. Parties to a negotiable promissory note

2. Bills of Exchange (Sec. 126, 185, NIL)

i. Kinds of bills of exchange

ii. Parties to a bill of exchange

3. Negotiable Instruments vs other Papers

i. Bill vs Notes

When Bill treated as Notes (Sec. 17e, 130 NIL)

Sesbreno vs CA (GR 89252, 24 May 1993)

ii. Documents of Title

iii. Letters of Credit

iv. Certificates of Stock

v. Postal Money Order

Philippine Education Co. vs Soriano (GR L-22405, 30 June 1971)

vi. Treasury Warrants

Course Outline Atty. Joanne L. Ranada
Negotiable Instruments Law First Semester, AY 2019 - 2020

III. FORM AND INTERPRETATION OF NEGOTIABLE INSTRUMENTS

A. General Principles

1. How negotiability is determined

Caltex (Philippines) vs. CA (212 SCRA 448, 10 August 1992)

a. Negotiation (Sec 10, NIL)

b. Assignment vs Negotiation; liability of Assignor (Art. 348, Code of Commerce)

Casabuena vs. CA (286 SCRA 594)

2. Effect of estoppel

Banco de Oro vs. Equitable Banking Corp. (157 SCRA 188, 1988)
Phil. Bank of Commerce vs Aruego (102 SCRA 530, 31 January 1981)

3. Requisites of Negotiability (Sec. 1, NIL)

a. It must be in writing and signed by the maker or drawer (Sec. 191, NIL)

b. It must contain an unconditional promise or order to pay a sum certain in money

i. Promise or Order to Pay (Sec. 10, NIL)

ii. Promise or Order must be unconditional
iii. Resolutory vs Suspensive Conditions (Art. 1173, 1181, NCC)
iv. Period
v. When is promise unconditional (Sec. 3, 39, NIL)
vi. Sum certain in money (Sec. 2-5d, 6e, NIL; CB Circular 799, 1 July 2013;
Art. 2209 NCC)
vii. Acceleration Clause
viii. Insecurity Clause
ix. Extension Clauses

Metropolitan Bank vs. CA (194 SCRA 169, 18 February 1991)

c. It must be payable on demand or at a fixed or determinable future time

Pay vs Palanca (57 SCRA 618)

d. It must be payable to order or bearer (Sec. 8, 9, NIL)

Ang Tek Lian vs CA (87 Phil 383, 25 Sept 1950)

e. The drawee must be named or indicated with reasonable certainty (Sec 1e, 130, NIL)

4. Omissions and provisions that do not affect negotiability

5. Interpretation of Instruments

6. Issuance / Delivery of negotiable instruments (Sec. 15, 16, 191, NIL)

Dela Victoria vs. Burgos (245 SCRA 374, 27 June 1995)

7. How are negotiable instruments and non-negotiable instruments transferred

Sesbreno vs. CA (222 SCRA, 24 May 1993)

Course Outline Atty. Joanne L. Ranada
Negotiable Instruments Law First Semester, AY 2019 - 2020

Consolidated Plywood vs IFC Leasing (149 SCRA 448, 30 April 1987)

Traders Royal Bank vs. CA (269 SCRA 16, 3 May 1997)

8. How negotiation takes place (Sec, 16, 30, 40 NIL)

Manuel Lim vs CA (251 SCRA 409, 19 Dec 1995)

Dela Victoria vs Burgos (245 SCRA 374, 27 June 1995)
Development Bank of Rizal vs Sima Wei (217 SCRA 743, 9 March 1993)

9. Incomplete negotiation of Order Instrument (Sec. 49, NIL)

B. Negotiation

1. Where indorsement should be placed (Sec 31, NIL)

2. When person deemed an indorser (Sec 63, NIL)

3. Other Rules of Indorsement (Sec. 31, 32, 40-48, 49, NIL)

Enrique Montinola vs PNB (68 Phil 178, 26 Feb 1951)

Ang Tek Lian vs CA (GR L-2516, 25 Sept 1950)

4. Kinds of Indorsement (Sec. 33, NIL)

a. Blank and Special (Sec. 34, 35 NIL)

i. Conversion of blank indorsement to special indorsement (Sec. 35, NIL)

b. Qualified and General (Sec. 38, 65, NIL)

Metropol (Bacolod) Financing vs. Sambok Motors

(120 SCRA 864, 28 February 1983)

c. Conditional (Sec. 39, NIL)

d. Restrictive (Sec. 36, 37, 47, NIL)

Gempesaw vs CA (218 SCRA 628, 9 February 1993)

e. Absolute

f. Joint (Sec. 41, NIL)

g. Irregular (Sec. 64, NIL)

5. When Indorsement is necessary (Sec. 30, 184, NIL)

6. Indorsement of entire instrument (Sec. 32, NIL)

7. Indorsement of bearer instrument (Sec. 40, NIL)

8. Indorsement when payable to two or more persons (Sec. 41, NIL)

9. Indorsement in representative capacity (Sec. 44, NIL)

10. Presumption on time and place of Indorsement (Sec. 45, 46, NIL)

11. Continuation of negotiable character (Sec. 47, NIL)

12. Negotiation by Prior Party (Sec. 50, NIL)

Course Outline Atty. Joanne L. Ranada
Negotiable Instruments Law First Semester, AY 2019 - 2020

13. Striking Out of Indorsement (Sec. 48, NIL)

14. Effect of transfer without Indorsement (Sec. 49, NIL)

C. Consideration

1. Consideration for issuance and subsequent transfer (Sec. 24, NIL)

2. What constitutes Value (Sec. 25, NIL)

Bibiano Banas vs CA (325 SCRA 259, 10 February 2000)

3. Effect if Value previously given (Sec. 26, NIL)

4. Holder for value (Sec. 26, 27, NIL)

5. Effect of want of consideration (Sec. 28, NIL)

D. Holders

1. What is a holder (Sec 191, NIL)

a. Classes of Holder (Sec. 26, 27, 52 NIL)

b. Rights of Holders (Sec. 51, 88, 119, NIL)

Chan Wan vs Tan Kim (109 Phil 706, 30 Sept 1960)

Atrium Management vs CA (144 SCAD 390, 28 Feb 2001)
Marcelo Mesina vs CA (145 SCRA 497, 13 Nov 1986)

2. Holders in Due Course (Sec. 52, 53, 54, 55, 56, 88, NIL)

a. Instrument complete and regular

b. Taken before overdue (Sec. 4, 7, 53, 83, 85, NIL)

c. Previously dishonored (Sec. 83, 149, NIL)

d. Notice of infirmity or defect (Sec. 54, 55, 56, NIL)

e. Good faith

De Ocampo vs. Gatchalian (3 SCRA 596, 30 Nov 1961)

Yang vs CA (GR No. 138074, 15 Aug 2003)
Stelco Marketing vs CA (210 SCRA 51, 17 June 1992)

f. Holder for Value (Sec. 24-27, NIL)

3. Presumption of Due Course Holding (Sec. 59, NIL)

4. Rights of Holders in Due Course (Sec. 14, 16, 57, NIL)

5. When subject to Original Defenses (Sec. 58, NIL)

Salas vs CA (181 SCRA 296)

State Investment House vs CA (175 SCRA 311, 13 July 1989)
Prudencio vs CA (143 SCRA 7, 14 July 1986)
Stelco Marketing vs CA (GR No. 96160, 17 June 1992)
Course Outline Atty. Joanne L. Ranada
Negotiable Instruments Law First Semester, AY 2019 - 2020

6. Rights of Holders Not in Due Course (Sec. 14, 16, 51, 53, NIL)

7. Accommodation Parties (Sec. 29, NIL)

8. Shelter Rule (Sec. 58, NIL)

Charles Fossum vs Fernandez Hermanos (44 Phil 713)

E. Parties Who Are Liable

1. Primary and Secondary Liability (Sec. 61, 66, 192, NIL)

2. Payment by party secondary liable (sec. 68, 70, 84, 89, 118, 120, 151, 184, NIL)

3. Liability vs Warranties

4. Liability and / or Warranties of Parties

a. Maker (Sec. 60, NIL)

b. Drawer (Sec. 61, NIL)

i. Relationship with drawee

ii. Relationship with collecting bank

Jai-Alai vs BPI (66 SCRA 29, 6 Aug 1975)

c. Acceptor (Sec. 62, 127, 139-141, 143, 165, 189, NIL)

PNB vs Picornell (46 Phil 716, 26 Sept 1922)

PNB vs CA (25 SCRA 693, 29 Oct 1968)

d. Indorsers (Sec. 63, 68, NIL)

i. General Indorser (Sec. 66, NIL)

Ang Tiong vs Ting (22 SCRA 713, 22 Feb 1968)

People vs Maniego (148 SCRA 30, 27 Feb 1987)

(a) conditions precedent to make unqualified indorser liable

ii. Qualified Indorser (Sec. 65, NIL)

iii. Indorsers of Bearer Instruments (Sec. 40, 65, 67, NIL)

iv. Irregular Indorser (Sec. 64, NIL)

v. Liablity of Accommodation Party (Sec. 29, 52, NIL)

Clark vs Sellner (GR No. 16477, 22 Nov 1921)

Crisologo vs CA (177 SCRA 594, 15 Sept 1989)
PNB vs Maza (GR No. 24224, 3 Nov 1925)
Maulini vs Serrano (28 Phil 640, 16 Dec 1914)

vi. Order of Liability (Sec. 68, NIL)

People vs Maniego (ibid)

Course Outline Atty. Joanne L. Ranada
Negotiable Instruments Law First Semester, AY 2019 - 2020

vii. Persons Negotiating by Delivery (Sec. 65, NIL)

viii. Liability of Agent or Broker (Sec. 19-21, 69 NIL)

Philippine Bank of Commerce vs Aruego (ibid)

ix. Person who should sign (Sec. 18, NIL)

a. Exceptions (Sec. 18, 19, 23, 65, 137, NIL)

F. Defenses

1. Real vs Personal

2. Real Defenses

a. Minority and Ultra Vires Acts (Sec. 22, NIL)

i. Defense of Minority (Art. 1341, NCC)

Atrium Management Corp. vs CA (GR No. 109491, 28 Feb 2001)

Crisologo-Jose vs CA (GR No. 80599, 15 Sept 1989)

b. Non-delivery of an Incomplete Instrument (Sec, 15, 16, NIL)

c. Fraud in Factum vs Fraud in Inducement

Salas vs CA (GR No. 76788, 22 January 1990)

Prudencio vs CA (143 SCRA 7, 14 July 1986)

d. Forgery and Want of Authority (Sec. 23, NIL); Cut-off Rule

i. Forgery of Maker's Signature

ii. Forgery of Indorser's Signature
iii. Forgery of Drawer's Signature
iv. Forgery of Bearer Instrument

Associated Bank vs CA (GE No. 107382, 31 Jan 1996)

Gempesaw vs CA (218 SCRA 682, 9 Feb 1993)
Republic vs Estrada (GR No. L40769, 31 July 1975)
MWSS vs. CA, (GR L62943, 14 July 1986)
Philippine Bank of Commerce vs Philippine Racing Club
(GR No. 150228, 30 July 2009)

v. Persons Precluded from setting up forgery

Metropolitan Bank vs CA (194 SCRA 169)

Samsung Construction vs Far East Bank (GR No. 129015, 15 Aug 2003)
PNB vs Quimpo (158 SCRA 582, 14 March 1988)
Banco de Oro vs. Equitable Banking (GR No. 74917, 20 Jan 1988)
Westmont Bank vs. Eugene Ong (GR No. 132250, 30 Jan 2002)
Ilusorio vs CA (GR No. 139130, 27 Nov 2002)
Traders Royal Bank vs RPN (GR No. 138510, 10 October 2002)
BPI vs CA (GR No. 102383, 26 Nov 1992)

e. Material Alteration (Sec. 124, 125, NIL)

PNB vs, CA (256 SCRA 491, 25 April 1996)

Montinola vs PNB (88 Phil 178, 26 Feb 1951)
Course Outline Atty. Joanne L. Ranada
Negotiable Instruments Law First Semester, AY 2019 - 2020

i. Alternation of negotiable instrument as a crime (Art 172, RPC)

ii. Alteration of amount in the negotiable instrument
iii. Immaterial alterations

f. Extinctive Prescription

PCIB vs CA (350 SCRA 446)

Papa vs AU Valencia (284 SCRA 643, 23 Jan 1998)

g. Illegality

3. Personal Defenses

a. Ante-dating vs post-dating (Sec. 12, NIL)

b. Insertion of wrong date (Sec 13, NIL)

c. Filling up of blanks beyond authority (Sec. 14, NIL)

d. Absence or failure of consideration (Sec 28, NIL)

State Investment House vs CA (ibid)

e. Simple fraud, duress, intimidation, force or fear, illegality of consideration, breach of faith
(Sec. 55, 56, 57, NIL)

f. Want of delivery of complete instrument (Sec 16, NIL)

g. Fraud in inducement

Great Eastern Insurance vs Hongkong Shanghai Bank Corp.

(GR No 18657, 23 Aug 1922)
Quirino Gonzalez Logging vs CA (GR No. 126568, 20 April 2003)

G. Enforcement of Liability

1. Parties primarily and secondarily liable

2. Enforcement of primary liability (Sec. 60, 62, NIL)

3. Enforcement of secondary liability

a. Promissory Notes

i. Presentment for payment (Sec. 70, NIL)

ii. Notice of Dishonor (Sec. 89, NIL)

b. Bills of Exchange

i. Presentment for acceptance, when mandatory (Sec. 143, NIL)

ii. Dishonored by non-acceptance

(a) Notice of Dishonor (Sec. 89, 115, 116 NIL)

(b) Protest (Sec. 159 NIL)

iii. If accepted

(a) Presentment for payment unless excused / not required

Course Outline Atty. Joanne L. Ranada
Negotiable Instruments Law First Semester, AY 2019 - 2020

iv. If dishonored upon presentment for payment

(a) Notice of Dishonor

(b) Protest

v. Acceptor for Honor; Referee In Case of Need

(a) Protest for Non-Payment (Sec. 165, NIL)

H. Presentment for Payment

1. Concept (Sec. 70, NIL)

2. Requisites for sufficiency of payment (Sec. 72, NIL)

3. Date of Presentment (Sec. 71, NIL)

4. Rule in determining maturity date (Sec. 85, NIL)

a. Fixed date

b. Payable on demand

c. Payable at a bank (Sec. 75, NIL)

5. Rule in computing time (Sec. 86, NIL)

6. Rule if payable at a bank (Sec. 75, 87, 127, 187 NIL)

7. Place of presentment (Sec. 70, 73 NIL)

8. Presentment to party primarily liable (Sec. 60, 62, 74, 76, 77, 78 NIL)

9. When Presentment excused, not required (Sec. 79-82 NIL)

10. Dishonor by Non-Payment (Sec. 83, NIL)

11. Liability of person secondarily liable when instrument dishonored (Sec. 84, NIL)

Crisologo-Jose vs CA (15 Sept 1989)

Salas vs CA (22 Jan 1990)
PNB vs CA (256 SCRA 491)
Great Eastern vs Hongkong Shanghai Bank (23 Aug 1922)
Republic vs Ebrada (31 July 1975)
PNB vs Quimpo (14 March 1988)
Gempesaw vs CA (9 Feb 1993)
PCIB vs CA (350 SCRA 446)
Papa vs AU Valencia (284 SCRA 643)
Far East Realty vs CA (166 SCRA 256, 1988)
McGuire vs Province of Samar (GR No. L8155, 23 October 1956)
Asia Banking vs Javier (GR No. 19051, April 1923)
Gullas vs PNB (GR 43191, 13 Nov 1935)
Nyco Sales vs BA Finance (200 SCRA 637, 1991)
Great Asian Sales vs CA (GR No 105774, 25 April 2002)
Luis Wong vs CA (GR No. 117857, 2 Feb 2001)

I. Presentment for Acceptance

Course Outline Atty. Joanne L. Ranada
Negotiable Instruments Law First Semester, AY 2019 - 2020

1. How made (Sec. 145, NIL)

2. When made (Sec. 143, 144, NIL)

3. Acceptance; requisites (Sec. 132, NIL)

a. How made (Sec. 132, 133-135, 137, 145, 72, 75, NIL)

4. When deemed accepted (Sec. 137 NIL)

5. Future bills (Sec. 135 NIL)

6. Time to accept (Sec. 136, 146, 147 NIL)

7. Rule when incomplete bill accepted (Sec. 138 NIL)

8. Kinds of acceptance (Sec. 139-142 NIL)

9. When Presentment for acceptance excused (Sec. 148, NIL)

10. Dishonor by non-acceptance (Sec. 149, 150, 151 NIL)

J. Notice of Dishonor (Sec. 89 NIL)

1. When instrument considered dishonored (Sec 149 NIL)

2. By whom given (Sec 90 NIL)

3. Notice by agent (Sec 91, 92, 94 NIL)

4. Time to give Notice (Sec 102-107 NIL)

5. Form of Notice (Sec 95, 96 NIL)

6. To whom Notice given (Sec. 97-101 NIL)

7. Place of Notice (Sec. 108 NIL)

8. When Notice is not required, excused or dispensed with (Sec. 109-115, 118 NIL)

9. Other rules (Sec. 116, 117 NIL)

10. Delay in giving Notice (Sec. 113 NIL)

K. Protest

1. By whom made (Sec. 154 NIL)

2. When required (sec. 152, 161, 167, 170 NIL)

3. When Protest need not be made (Sec. 118 NIL)

4. Protest for non-acceptance, non-payment (Sec. 157 NIL)

5. How made (Sec. 153 NIL)

6. When to be made (Sec. 155 NIL)

7. Protest for better security (Sec. 158 NIL)

Course Outline Atty. Joanne L. Ranada
Negotiable Instruments Law First Semester, AY 2019 - 2020

8. Where made (Sec. 156 NIL)

9. When Protest dispensed with (Sec. 159 NIL)

10. Protest where Bill lost (Sec. 160 NIL)

L. Notice of Dishonor vs Protest

M. Acceptance for Honor (Sec. 161-170 NIL)

vs Ordinary Acceptance

vs Payment for Honor (Sec. 173-177 NIL)

vs payment by person primarily liable

N. Bills in Sets (Sec. 178-183 NIL)

IV. DISCHARGE OF INSTRUMENTS

A. Concept

B. How Instrument Discharged (Sec. 119, 120 NIL)

1. Payment in Due Course (Sec. 88 NIL)

a. By the principal debtor (Sec. 119a, NIL)

b. By the accommodated party (Sec. 119b NIL)

c. Payment by person secondarily liable (Sec. 121 NIL);

right of party who discharges instrument

d. To whom must payment be made

2. Renunciation by Holder (Sec. 22 NIL)

3. Intentional Cancellation

a. Rule in case of unintentional cancellation (Sec. 123 NIL)

4. Any act that discharges simple contracts (Art. 1231 NCC)

5. Principal debtor becomes holder

C. Discharge of Persons Secondarily Liable (Sec. 120 NIL)

D. Discharge of Prior Party

E. Tender of Payment

F. Release of Principal Debtor

G. Extension of Term

H. Payment for Honor (Sec. 171-177 NIL)

I. Right of party who discharges instrument (Sec. 121 NIL)

J. Surrender of instrument upon discharge

Course Outline Atty. Joanne L. Ranada
Negotiable Instruments Law First Semester, AY 2019 - 2020

State Investment House vs CA (GR No. 101163, 11 Jan 1993)

V. CHECKS

A. Checks defined (Sec. 185, 186, 189 NIL)

Banco de Oro Savings vs Equitable Banking Corp (157 SCRA 188, 1988)

B. Distinguished from Drafts

RP vs Philippine National Bank (GR No. L-16106, 30 Dec 1961)

C. Relationship between Drawer, Drawee and Payee

D. Kinds of Checks

1. Cashier's Check vs Manager's Check

BSP Circular 259 Series of 2000

BSP Circular 291 Series of 2001

2. Certified Check (Sec. 187-189 NIL)

New Pacific Timber vs Hon. Seneris (19 December 1980)

PNB vs National City Bank of New York (63 Phil 711)

3. Crossed Check (Art. 541 Code of Commerce)

a. Kinds

b. Effects of crossing a check

Associated Bank vs CA (208 SCRA 468, 1992)

Bataan Cigar vs CA (230 SCRA 648, 3 March 1994)
Gempesaw vs CA (218 SCRA 682, 3 Feb 1994)
State Investment House vs IAC (174 SCRA 310)

4. Memorandum and Traveller's Checks

People vs Nitafan (GR No. 75954, 22 October 1992)

E. Checks vs Bills

F. Relationship between Payee, Drawer, Drawee

Spouses Moran vs CA (GR No. 105836, 7 March 1994)

Gempesaw vs CA
Hongkong and Shanghai Bank vs Catalan (18 October 2004)

G. When required to be presented for payment (Sec. 185 NIL)

H. Effect of Death of Drawer

I. Philippine Clearing House Corp. Rules (RA 7653; New Central Bank Act, Sec. 102)

1. Relationship of parties

2. Warranties
Course Outline Atty. Joanne L. Ranada
Negotiable Instruments Law First Semester, AY 2019 - 2020

3. 24-Hour Rule

4. Iron clad rule for cashier's checks

Mesina vs IAC

J. Crimes involving Checks

1. Estafa (Art. 315 [2] [d], RPC)

2. BP 22

Domagsang vs CA (347 SCRA 75, 2000)

3. Check Kiting (Art. 315 [1] [b], RPC)

Ramos vs CA (203 SCRA 657)