Académique Documents
Professionnel Documents
Culture Documents
BEARER INSTRUMENT
Notes:
It is important that we distinguish whether the instrument is a bearer or an order
instrument.
In the exam, if it is a bearer instrument, you have to raise both the issue on forgery
and non-delivery for parties prior the forgery.
Take note that when it is forgery, divide the parties as Prior and Subsequent to the
forgery. Prior parties can raise the defense of forgery while Subsequent parties cannot.
As subsequent parties, they are precluded from raising the defense of forgery because
by negotiating it by delivery, they warrant that the instrument is genuine and in all
respects what it purports to be.
Promissory Note
A. Forged Signature belongs to the INDORSER
The instrument was delivered by Y X A
It was stolen by F and he forges the signature of A and delivers it to B C D.
such that:
YXAFBCD
Answer:
Yes, Sec. 1 clearly provides that the maker should sign the instrument. In that, if the
signature of the maker is forged, there may be an issue as to whether the
instrument continues to be negotiable or not. But then if the instrument is already
in the hands of a person other than the maker of the instrument there could
presumption that there is delivery but this depends whether you are a holder in due
course or not.
-
Bill of Exchange
A. Forged Signature belongs to the INDORSER
Illustration:
To: Z
Pay to X or bearer
P1,000,000.
Y X.
X presented the instrument to Z for acceptance.
Z accepted the instrument and gave it back to X.
XA
F stole the instrument and forged the signature of A.
FBCD
[ such that: Y X A F B C D ]
Z
Question: Discuss the rights of D in relation to prior parties.
Answer:
If the problem is silent, apply Sec. 59 which states that every holder is deemed a holder in due
course.
1. If D is a holder in due course or a holder through a holder in due course, he can
enforce it against:
Z YES, he is primarily liable. It being a bearer instrument any indorsement is not
necessary to acquire title.
Y YES, the forged signature is not necessary to acquire title to the instrument. They are
precluded from setting
up the defense of forgery as they are negotiating by mere delivery, it being a bearer
instrument.
(Atty. Amago later on added this:) He cannot also raise the defense of non-delivery
because as to a holder in
due course there is a conclusive presumption of delivery.
X YES, (same as Y)
A YES, (same as Y)
F YES, he perpetrated the theft and it is a crime not tolerated in all commercial
transactions.
He, by negotiating through delivery, also warrants that the instrument is genuine and
in all respects what it
purports to be.
B - YES, because by negotiating through delivery they warrant that the instrument is
genuine and in all respects
what it purports to be.
C YES, (same as B)
2. If D is not a holder in due course of a bearer instrument the issue now changes from
forgery to non-delivery.
What is the rule in non-delivery of instrument?
- In the hands of a holder not in due course there is a rebuttable presumption of delivery
and prior parties can raise the defense of non-delivery by proving that (1) there is no
delivery, (2) no authority to deliver or that (3) the delivery is conditional or for a special
purpose.
D can enforce the instrument against:
Z- YES, he is primarily liable. It being a bearer instrument any indorsement is not
necessary to acquire title.
Y NO, being a party prior to the forgery he can raise the personal defense of nondelivery, no authority to deliver, delivery is conditional or for a special purpose.
X NO, (same as Y)
A NO, (same as Y)
F YES, he perpetrated the theft and it is a crime not tolerated in all commercial
transactions.
He, by negotiating through delivery, also warrants that the instrument is genuine and
in all respects what it
purports to be.
B YES, because by negotiating through delivery they warrant that the instrument is
genuine and in all respects
what it purports to be.
C YES, (same as B)
To Z:
Please pay X or bearer P1,000,000
(Sgd) M - forged
The signature of M was forged by F.
M (F) -> X -> A -> B -> C
I
Z (accepted)
C can enforce the instrument against:
Z- YES, Z is primarily liable. By accepting the instrument, the acceptor engages that he will pay
it according to the tenor of his acceptance, and admits the existence of the drawer, the
genuineness of his signature, and his capacity and authority to draw the instrument and the
existence of the payee and his capacity to indorse (Sec. 62).He is a party precluded from raising
the defense of forgery.
F- YES, because he perpetrated the forgery. The law condemns criminal acts in commercial
transactions. F also warrants the instrument to be genuine and in all respects what it purports
to be because he negotiated it to X by delivery.
M- NO, Raise the real defense of forgery. His forged signature is wholly inoperative, no right to
retain the instrument, to give discharge, to enforce payment.
X- YES, As party subsequent to the forgery, by negotiating the instrument by delivery, he
warrants the instrument to be genuine and in all respects what it purports to be.
ORDER INSTRUMENT
Promissory Note:
A. Forged signature belongs to the INDORSER
I promise to pay X or to his order the sum of P1,000,000.00.
Sgd by Y.
The instrument was issued to X
Y -> X -> A -> B - - - F stole it and forged Bs signature - - - > C -> D
D can enforce the instrument against:
Y- NO, Prior parties to the forgery can raise the defense of forgery.
X- NO, (Same as Y)
A- NO, (Same as Y)
B- NO, (Same as Y)
F- YES, since the law condemns forgery. NO WARRANTY. The liability is not based on an
indorsers warranty of genuineness because the forgers signature does NOT appear in the
instrument and this is an ORDER instrument.
C- YES, he warrants the instrument to be genuine and in all respect what it purports to be.
A. Forged signature belongs to the MAKER
I promise to pay X or to his order the sum of P1,000,000.00.
Sgd by Y.forged by F
Y (F) -> X -> A -> B - > C -> D
D can enforce the instrument against:
Y- NO, Raise the real defense of forgery. His forged signature is wholly inoperative, no right to
retain the instrument, to give discharge, to enforce payment.
F- YES, since the law condemns forgery.
X- YES, He warrants the instrument to be genuine and in all respects what it purports to be
A- YES, (Same as X)
B- YES, (Same as X)
C- YES, (Same as X).
Bill of Exchange:
Y (F) X A B - C
|
Z (Acceptor)
C can enforce the instrument against:
Z- YES, he warrants the genuineness of the signature of the drawer (Sec 62), and because of
that he is now PRECLUDED from raising the defense of forgery ACCEPTOR BUT ONLY IN
RELATION TO FORGED SIGNATURE OF THE DRAWER
Y- NO, As to him, the forged signature is wholly inoperative, no right to retain the instrument, to
give discharge, to enforce payment. And because, in the first place, he was NEVER a party to the
instrument.
F- YES, Because he is the one who has caused the forgery, and the law condemns forgery.
X- YES, Because he is a party subsequent to the forgery. By endorsing it, he warrants the
instrument to be genuine and in all respects what it purports to be.
A-YES, (Same as X)
B- YES, (Same as X)
NOTE
X, A, and B? Can they claim that there was never negotiable in the first place?
Yes, BUT they are ESTOPPED because they have allowed it to be negotiated.
A. Forged signature belongs to the DRAWEE- Same as in a bearer instrument