Syllabus For Negotiable Instruments Law

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Kalinga State University

College of Laws
Syllabus for Negotiable Instruments Law
2nd Semester, 2021-2022
May Frances S. Calsiyao

COURSE DESCRIPTION:

A study of the Negotiable Instruments Law (Act 2031), related jurisprudence other
related laws including the Bouncing Checks Law (BP Blg. 22) and other relevant
administrative issuances.
METHODOLOGY:

The class will be conducted mainly through recitations, class discussions, case
analysis, quizzes, and examinations.

COUSE OBJECTIVES

By the end of the semester, the students are able to:

1. Understand, describe and explain important concepts in Negotiable Instruments


Law, such as negotiability, holder in due course and so on.

2. Have a clear grasp of the process that a negotiable instrument undergoes, from
issuance to discharge and to be well-acquainted with the rules that govern it.

3. Prepare for independent, critical study and assessment of judicial decisions related
to Negotiable Instruments Law.

4. Appreciate the scholarly study of the Law on Negotiable Instruments.

COURSE REQUIREMENTS:

Readings and assignments. Students are expected to be familiar with the assigned
topic on a week-to-week basis and must be ready to participate in class discussions.
Supplemental readings and assignments will be given from time to time to ensure better
understanding to specific topic.

Recitation. Each student will be called to recite or lead the discussion on an assigned
topic during the term. Students are expected to demonstrate during recitation and class
discussions their knowledge on the assigned topic and their ability to express themselves
convincingly.

Quizzes. Students will be given short quizzes from time to time to test their
knowledge on the topic assigned for the week.

Mid-term and Final Examinations. Students are given two major examinations during
the term. These will test their knowledge and familiarity of specific topics and their ability to
think critically and logically.

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GRADING SYSTEM (following College Rules):

Recitation and Quizzes - - - - - - 40%


Examinations - - - - - - - - - - - - - 50%
Attendance- - - - - - - - - - - - - - - 10%

RECOMMENDED TEXTBOOKS:

Campos, Jose C. “Notes and Selected Cases on Negotiable Instruments Law” Central Book Supply:
Quezon City, Philippines. 1994

Aquino-Tambasacan, Rocille S. “Negotiable Instruments in a Nutshell” Central Book Supply:


Quezon City, Philippines. 2016

COURSE OUTLINE AND CASE LIST:

I. Introduction
a. Kinds of negotiable instruments
b. Functions of negotiable instruments
i. San Miguel Corporation vs. Puzon, G.R. No. 167567, September 22, 2010
ii. Pua vs. Spouses Lo Bun Tiong, 708 SCRA 571, October 23, 2013
c. Concept of negotiability
d. Origin of negotiable instruments
e. History of the Negotiable Instruments Law (NIL)
f. Applicability of the NIL

II. Requisites of Negotiability (Sec. 1, 184, 126)


a. Written form and signature (Sec. 18, 19)
i. HSBC vs. CIR, G.R. No. 166018 and 167728, June 4, 2014.
b. Unconditional order or promise to pay (Sec. 3)
c. Sum payable must be certain (Sec. 2)
d. Payable in money (CB Circular 799, July 1, 2013; Art. 2209, New Civil Code)
e. Certainty of time of payment
i. When payable on demand (Sec. 7)
1. Pay vs. Palanca, 57 SCRA 618 (1974)
ii. Payable at a fixed time
iii. Payable at a determinable future time (Sec. 4, 11, 17)
iv. Effect of accelerated provisions
1. Rehabilitation Finance Corp. vs. CA, 94 Phil 984 (1954)
v. Provisions extending time of payment
f. Must be payable to order or bearer (Sec. 8, 9)
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i. People v. Wagas, G.R. No. 157943, September 4, 2013
ii. Rivera vs. Chua, G.R. No. 184458, January 14, 2015
iii. PNB vs. Rodriguez, G.R. No. 170325, September 26, 2008
g. Parties must be designated with certainty (Sec. 8, 128, 130)
h. Provisions not affecting negotiability (Sec. 5)
i. PNB vs. Manila Oil Refining, 43 Phil 445 (1922)
i. Omissions not affecting negotiability (Sec. 6)
j. Rules of Construction (Sec. 17)

III. Transfer
a. Delivery and issuance (Sec. 16)
i. Dela Victoria vs. Burgos, 245 SCRA 374, June 27, 1995
b. Negotiation (Sec. 30, 191)
c. Methods of Negotiation
d. How indorsement made
i. By signature on instrument or on allonge (Sec. 31)
ii. In case of joint payees
iii. If name misspelled (Sec. 43)
e. Indorsement must be of entire instrument (Sec. 32)
f. Kinds of Indorsements (Sec. 33)
i. Special and blank indorsements (Sec. 34, 40,35)
ii. Qualified indorsement (Sec. 38)
1. Metropol (Bacolod) Financing vs. Sambok Motors, 120 SCRA 864,
Feb. 28, 1983
iii. Conditional Indorsement (Sec. 39)
iv. Restrictive Indorsement (Sec. 36, 37)
v. Indorsement to or by collecting bank
1. Leonardi vs. Chase National Bank, 363 App. Div. 552, 33 N.Y.S. 2d
706 (1942)
vi. Negotiation by joint or alternative payees or endorsees (Sec. 41)
1. Metropolitan Bank and Trust Company, etc. vs. BA Finance Corporation
and Malayan Insurance Co, Inc., G.R. No. 179952, December 4, 2009
vii. Unindorsed Instruments (Sec. 49)
1. Whistler vs. Forster 16 Com. Bench Rep. 246 (1863)
viii. Cancellation of indorsements (Sec. 48)
ix. Indorsement of agent (Sec. 44)

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x. Presumption as to indorsements (Sec. 45, 46, 42)
xi. Continuation of negotiable character (Sec. 47)

IV. Holder in Due Course (Sec. 52)


a. Rights of a holder in due course (Sec. 57, 58)
i. BPI vs. Alfred Berwin and Co., 52 Phil 147 (1928)
ii. Dino vs. Judal-Loot, G.R. No. 170912, April 19, 2010
b. Holder for value
i. What constitutes value (Sec. 24, 25)
1. Bibiano Banas vs. CA, 325 SCRA 259, Feb. 10, 2000
ii. Bank credit for value
1. National Bank of Commerce vs. Morgan, 207 Ala. 65, 92 So. 10, 24
ALR 897 (1921)
iii. What constitutes a holder for value (Sec. 26)
iv. Where holder has a lien on instrument (Sec. 27)
1. Caltex (Phil.) vs. Court of Appeals, 212 SCRA 448(1992)
v. Burden of proof (Sec. 24)
c. Holder in good faith (Sec. 55, 56)
i. Notice, bad faith, effect of suspicious circumstances
1. De Ocampo & Co. vs. Gatchalian et al., 3 SCRA 596 (1961)
2. State Investment House vs. IAC, 175 SCRA 310 (1989)
3. Go vs. Metropolitan Bank, GR No. 168842, Aug. 11, 2010
ii. Financing company not a holder in good faith as to buyer
1. Consolidated Plywood Industries vs. IFC Leasing and Acceptance Corp.,
149 SCRA 448 (1987)
2. Salas vs. CA, 181 SCRA 296 (1990)
iii. Effect of purchase at a discount
iv. Effect of notice before full payment (Sec. 54)
v. Constructive notice not sufficient
vi. Notice of accommodation not notice of defect (Sec. 29)
d. Complete and regular (Sec. 124)
i. Miles City Bank vs. Askin, 119 Mont. 581, 179 P. 2d 750 (1947)
e. Holder before or at maturity and without notice of dishonor (Sec. 53)
i. Bliss et al. vs. California Co-op Producers, 30 Cal. (2d) 240, 181 P. (2d) 369
(1947)
f. Effect of Postdating or antedating (Sec. 12)

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g. Effect of qualified, conditional and restrictive indorsements
h. Payee as holder in due course
i. Rights of a purchaser from a holder in due course (Sec. 58)
i. Fossum vs. Fernandez Hermanos et al., 44 Phil 713 (1923)
j. Presumption in favor of due course holding (Sec. 59)
i. Asia Banking Corporation vs. Ten Sen Guan y Sobrinos, et al., 44 Phil 511
(1923)
k. Transferee of unindorsed instrument (Sec. 49)
i. Commercial Bank of Lafayette & Trust Co. vs. Barry, 179 La. 684, 154 So.
736 (1934)

V. Defenses and Equities


a. Defenses and equities in general (Sec. 57, 58, 55)
b. Incapacity (Sec. 22)
i. Atrium Management Corp. vs. CA, GR 109491, Feb. 28, 2001
c. Illegality
i. Rodriguez vs. Martinez, 5 Phil. 67 (1905)
d. Forgery
i. In general (Sec. 23, 18)
1. Philippine National Bank vs. Hon. Romulo S. Quimpo, GR No.
53194, March 14, 1988, 158 SCRA 582
ii. Acceptance and Payment under mistake
1. When drawee accepts or pays a forged instrument (Sec. 62)
a. Price vs. Neal, 3 Burr. 1354 (1762)
b. Philippine National Bank vs. CA, 25 SCRA 693 (1968)
c. Republic Bank vs. Court of Appeals, 196 SCRA 100 (1991)
2. Extensions of the Price vs. Neal doctrine
a. Overdraft
i. First National Bank of Portland vs. Noble, et al., 179
Ore. 26, 168 P (2d) 354 (1946)
b. Stop payment order
3. Effect of negligence of depositor
4. Effect of payment under forged instruments
a. Jai-alai Corp. of the Phils. vs. BPI, 66 SCRA 29 (1975)
b. Republic Bank vs. Ebrada, 65 SCRA 680 (1975)

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c. Banco de Oro Savings and Mortgage Bank vs. Equitable Banking
Corp., 157 SCRA 188 (1988)
d. BPI vs. CA, 216 SCRA 51 (1992)
e. Gempesaw vs. CA, 218 SCRA 682 (1993)
f. Allied Banking Corp. vs. Lim Sio Wan, 549 SCRA 504,
March 27, 2008
5. Effect of negligence of drawee in informing recipient of forgery
a. Areza vs. Express Savings Bank, G.R. No. 176697, September
10, 2014
6. Effect of negligence of drawer in case of forged indorsements
on checks
a. Associated Bank vs. CA, 252 SCRA 620, (1996)
b. Samsung Construction Company Phils. vs. FEBTC, 436 SCRA
402 (2004)
e. Material alteration
i. In general (Sec. 124, 125)
1. Montinola vs. PNB, 88 Phil 178 (1951)
2. PNB vs. CA, 256 SCRA 491 (1996)
ii. Effect of negligence of drawer of check
1. Foutch vs. Alexandria Bank and Trust Co., 177 Tenn. 348, 149 SW
(2d) 76, (1941)
iii. Effect of drawee’s payment or acceptance of altered check
1. MBTC vs. Cabilzo, 510 SCRA 259, December 6, 2006
2. CHOM No. 15-460 – No Erasures Rule
f. Fraud
i. CLT Corp vs. Panac, et al., 149 P. (2d) 901, (1944)
ii. CLT Corp. vs. Panac, et al., 25 Cal. (2d) 547, 154 P. (2d) 710, 160 ALR
1285 (1944)
g. Duress
h. Complete instrument which is undelivered (Sec. 16)
i. Cohn vs. City of Taunton, 303 Mass. 182, 21 NE (2d) 281 (1939)
ii. Rizal Commercial Banking Corporation vs. Hi-Tri Development Corporation and
Luz R. Bakunawa, G.R. No. 192413, June 13, 2012.
i. Incomplete instrument which is undelivered (Sec. 15)
i. Linick vs. AJ Nutting and Co., 125 N.Y. 93, 140 App. Div. 265 (1910)
j. Incomplete instrument which has been delivered (Sec. 14)

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i. Patrimonio vs. Gutierrez, G.R. No. 187769, June 4, 2014
k. Consideration (Se. 28)
i. William Barco & Son, et al. vs. Forbes, 194 N.C. 204, 139 SE 227 (1927)

VI. Liability of Parties


a. Primary parties
i. In general (Sec. 192, 70)
ii. Liability of maker (Sec. 60)
1. First National Bank of Central City vs. Utterback, et al., 117 Ky. 76,
197 SW 534, LRA 1918B, 838 (1917)
iii. Status of drawee prior to acceptance or payment; effect of stop order
(Sec. 127, 189)
1. Araneta vs. Bank of America, 40 SCRA 144 (1971)
2. Singson et al., vs. BPI, 23 SCRA 1117 (1968)
iv. Liability of acceptor (Sec. 62)
b. Formal requisites of acceptance (Sec. 191, 132, 133, 138)
i. Far East Bank vs. Gold Palace, GR No. 168274 (2008)
ii. Constructive acceptance (Sec. 136, 137, 150)
1. Sumcad et al. vs. Province of Samar, et al., 52 OG 18, 7582 (1956)
c. Acceptance on a separate instrument (Sec 134, 135)
i. Coolidge et al. vs. Payson et al., 2 Wheat, 66, 4 L. Ed. 185 (1817)
d. Kinds of acceptance
i. General acceptance (Sec. 139, 140)
ii. Qualified acceptance (Sec. 141, 142)
1. Conditional
2. Partial
3. Local
4. As to time
5. As to drawee
iii. Trade acceptance
iv. Banker’s acceptance
e. Checks (Sec. 185, 63)
i. Definition, nature and kinds
1. PAL, Inc., vs. CA, GR No. 49188, Jan. 30, 1990
2. Fortunado vs. CA, 196 SCRA 269, (1991)
3. Mesina vs. IAC, 145 SCRA 499 (1986)

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ii. Certification and its effects (Sec. 187-189)
1. New Pacific Timber vs. Seneris, 101 SCRA 686 (1980)
2. Roman Catholic Bishop of Malolos vs. IAC, GR No. 7211, November
16, 1990
iii. Distinction between surrender of check upon payment and negotiation
iv. Clearing of checks
1. PCHC Memo Circular 2636 (June 19, 2014)
2. PCHC CHOM No. 15-460-A, September 2, 2015
f. Liability of secondary parties (Sec. 70)
i. Liability of drawer (Sec. 61)
1. PNB vs. Picornell, 46 Phil 716 (1922)
2. Banco Altantico vs. Auditor General, 81 SCRA 335 (1978)
ii. Criminal liability for bouncing checks
1. Under BP No. 22
2. Estafa under the Revised Penal Code
a. Lozano vs. Martinez, 146 SCRA 323 (1986)
b. People vs. Nitafan, 215 SCRA 79 (1992)
iii. Liability of qualified indorser and one negotiating by delivery (Sec. 65)
iv. Liability of general or unqualified indorser (Sec. 66, 67, 63, 40)
1. Adolf Ramish, Inc. vs. Woodruff, 2 Cal. (2d) 190, 28 P. (2d) 360
(1934)
2. Bank of America vs. Associated Citizens Bank, G.R. No. 141001, May
21, 2009
v. Liability of restrictive indorser
vi. Order of liability among indorsers (Sec. 68)
1. Metropolitan Bank and Trust Company, etc. vs. BA Finance Corporation
and Malayan Insurance Co, Inc., G.R. No. 179952, December 4, 2009
g. Liability of accommodation party (Sec. 29, 63, 64)
i. Clark vs. Sellner, 42 Phil 384 (1921)
ii. Acuna vs. Veloso, 50 Phil 241 (1927)
iii. Ang Tiong vs. Ting et al., 22 SCRA 713 (1968)
iv. Prudencio vs. CA, 143 SCRA 7 (1986)
v. Anamer Salazar vs. J.Y. Brothers Marketing Corporation, G.R. No. 171998,
October 20, 2010
h. Liability of an agent (Sec. 19-21, 69)
i. Insular Drug Co., Inc. vs. PNB, 58 Phil 684 (1933)
ii. Philippine Bank of Commerce vs. Aruego, 102 SCRA 530 (1981)
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i. Signature by trade name (Sec. 18)
j. Presentment for acceptance
i. When necessary; effect of non-presentment (Sec. 143, 144, 193)
ii. How and when made (Sec. 145-146)
iii. When excused (Sec. 147-148)
iv. Dishonor and its effects (Sec. 149-151, 89, 117)
k. Presentment for payment
i. When presentment necessary; effect of non-presentment (Sec. 70)
ii. When presentment not necessary
1. As to drawer (Sec. 79)
2. As to indorser (Sec. 80)
3. As to all secondary parties (Sec. 82, 151, 111)
iii. Presentment of instrument bearing fixed maturity (Sec. 71, 85-86, 194)
iv. Presentment of demand notes (Sec. 71)
v. Presentment of demand bills of exchange
vi. Presentment of checks (Sec. 185-186)
1. PNB vs. Seeto, 91 Phil 756 (1952)
2. Crystal vs. CA, 71 SCRA 443 (1976)
vii. When delay in presentment excused (Sec. 81)
viii. Manner of presentment (Sec. 74)
ix. What constitutes sufficient presentment (Sec. 72)
1. By whom; crossed checks
a. Associated Bank vs. CA, 208 SCRA 465 (1992)
b. Equitable Banking Corporation vs. Special Steel Products, Inc.,
G.R. No. 175350, June 13, 2012
2. Time of presentment (Sec. 72-b, 75)
3. Place of presentment (Sec. 73)
4. To whom presentment must be made (Sec. 72-d, 76-78)
x. What constitutes dishonor by non-payment (Sec. 83)
xi. Effect of dishonor by non-payment (Sec. 84)
1. Luis Wong vs CA, GR 117857, Feb. 2, 2001
l. Notice of dishonor
i. When necessary (Sec. 89)
1. Gullas vs. PNB, 62 Phil 519 (1935)
ii. Form and contents of notice (Sec. 95, 96)
iii. Time within which notice must be given (Sec. 102-107, 113)

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iv. Place where notice must be given (Sec. 108)
v. Who can give notice (Sec. 90-91)
vi. To whom notice can be given
1. If given by an agent (Sec. 94)
2. To whom in general (Sec. 97)
3. If party is dead (Sec. 98)
4. To partners (Sec. 99)
5. To joint parties (Sec. 100)
6. To bankrupt (Sec. 101)
vii. In whose favor notice operates (Sec. 92-93)
viii. When rule requiring notice not applied
1. In general (Sec. 112)
2. When notice of non-acceptance already given (Sec. 116)
3. Waiver (Sec. 109-110)
4. When not necessary to charge drawer (Sec. 114)
a. State Investment House vs. CA, 217 SCRA 33 (1993)
5. When not necessary to charge indorser (Sec. 115)
ix. Legal effect of failure to give notice (Sec. 89, 117)
m. Protest
i. Definition and method
ii. When necessary (Sec. 152, 129, 157)
iii. Forms and contents of certificate of protest (Sec. 153)
iv. Purpose of the certificate of protest
v. By whom made (Sec. 154)
vi. Time and place of protest (Sec. 155-156)
vii. Protest for better security (Sec. 158)
viii. When delay is excused and protest is dispensed (Sec. 159, 112)
1. Tan Leonco vs. Go Inqui, 8 Phil 531 (1907)
ix. Waiver of protest (Sec. 111)
x. Protest in case of loss of instrument (Sec. 160)
xi. Acceptance for honor (Sec. 161, 131)
xii. Payment for honor (Sec. 171)
xiii. Liability of party on indorsement after maturity (Sec. 7)
xiv. Instruments payable at a bank (Sec. 87)
xv. Bills in set (Sec. 178-183)

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xvi. Liability of transferors or assignors of negotiable instruments (Art.
1628, NCC)
VII. Discharge
a. Discharge of the instrument (Sec. 119)
i. By payment in due course (Sec. 51, 88)
1. Medium of payment
2. By whom made
3. When check deemed paid by drawee bank
4. To whom made
a. Equitable Banking vs. IAC, 161 SCRA 518 (1988)
5. At or after maturity
6. In good faith and without notice
ii. By intentional cancellation (Sec. 119 (c), 123)
iii. By any other act which will discharge a contract
iv. By reacquisition of principal debtor in his own right (Sec. 119 (e))
v. By renunciation of holder (Sec. 122)
vi. Material alteration (Sec. 124, 125)
b. Discharge of secondary parties (Sec. 120)
i. By discharge of instrument
ii. By intentional cancellation of signature (Sec. 123, 48)
iii. By discharge of prior party
iv. By valid tender of payment by prior party
v. By release of principal debtor
vi. By extension of time of payment (Sec. 120 (f))
vii. By renunciation (Sec. 122)
viii. By taking a qualified acceptance (Sec. 142)
ix. By failure to make due presentment (Sec. 70, 144)
x. By failure to give notice of dishonor (Sec. 89)
xi. Certification of check at instance of holder (Sec. 188)
xii. Effect of reacquisition by prior party

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