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OVERVIEW

INTRODUCTION Instruments are negotiable when they conform to all the requirements prescribed by the Negotiable Instruments Law (NIL) Act 2031 enacted February 3, 1911. Kinds of negotiable instruments Two main groups: o Promissory note (Sec. 184); and Evidences a promise to pay money E.g. normal promissory note, certificate of deposit and the bond o Bill of Exchange (Sec. 126) An order made by one person to another to pay money to third person E.g. checks, draft LEGISLATIVE HISTORY OF THE NIL Verbatim reproduction of Uniform Negotiable Instruments Law of US (1896) o This statute was patterned after English Bill of Exchange Act (1882) Since 1911, no amendment to the NIL has been made

Any instrument which has the requisites of enumerated therein is negotiable and is governed by the NIL. All other instruments are non-negotiable. Note that the fact that an instrument does not meet the requisites will not affect its validity. Only consequence is that it will not be governed by the NIL but by the general law on contracts (New Civil Code).

Functions of Negotiable Instruments A negotiable instrument may serve any of the following functions: o As a substitute for money in payment for property or services; o As a means of creating and transferring credit; and o To facilitate sale of goods KINDS OF NEGOTIABLE INSTRUMENTS & PARTIES Section 126 Bill of exchange, defined. A bill of exchange is an unconditional order in writing addressed by one person to another, signed by the person giving it, requiring the person to whom it is addressed to pay on demand or at a fixed or determinable future time a sum certain in money to order or to bearer. Section 184 Promissory note, defined. A negotiable promissory note within the meaning of this Act is an unconditional promise in writing made by one person to another, signed by the maker, engaging to pay on demand, or at a fixed or determinable future time, a sum certain in money to order or to bearer. Where a note is drawn to the maker's own order, it is not complete until indorsed by him. Parties and the Nature of their Liability Parties and the nature of their liabilities Two parties to a promissory note: o Maker the promissory o Payee the person to whom the promise to pay is made Three parties in a bill of exchange: o Drawer the person who gives the order to pay in a bill of exchange o Drawee the addressee of the order o Payee person to whom the payment is to be made Note that when the payee of an instrument transfers it to

APPLICABILITY OF NIL NIL applies only to negotiable instruments i.e. to those instruments which conform with the requisites laid down in Sec. 1.

NEGOTIABLE INSTRUMENTS; DEFINITIONS Section 1 Form of negotiable instruments. An instrument to be negotiable must conform to the following requirements: (a) It must be in writing and signed by the maker or drawer; (b) Must contain an unconditional promise or order to pay a sum certain in money; (c) Must be payable on demand, or at a fixed or determinable future time; (d) Must be payable to order or to bearer; and (e) Where the instrument is addressed to a drawee, he must be named or otherwise indicated therein with reasonable certainty. In effect gives definition of a negotiable instrument

another by signing it at the back, he is said to have negotiated or indorsed the same and thereby becomes an indorser. The person to whom he negotiates it is the indorsee, who, by such negotiation becomes the holder of the instrument. As to nature of liabilities: o Primary party is the one who is absolutely and unconditionally required to pay the instrument when it falls due. The maker is the person primarily liable in a promissory note No person is primarily liable in a bill of exchange, until and unless the drawee accepts the order of the drawer to pay. If drawee accepts, he becomes an acceptor who is absolutely bound to pay on the date specified on the bill. The drawer of a bill of exchange and the indorsers of either a note or a bill are the secondary parties.

right. However, such tender is not in itself payment that relieves the redemptioner from his liability to pay the redemption price. NEGOTIABLE INSTRUMENTS Warehouse Receipts NON-NEGOTIABLE

Document of Title Article 1636, CC "Document of title to goods" includes any bill of lading, dock warrant, "quedan," or warehouse receipt or order for the delivery of goods, or any other document used in the ordinary course of business in the sale or transfer of goods, as proof of the possession or control of the goods, or authorizing or purporting to authorize the possessor of the document to transfer or receive, either by endorsement or by delivery, goods represented by such document. Letter of Credit Certificate of Stocks Certificate of Deposit Is an instrument issued by a bank reciting a deposit of certain sum of money, payable either at a fixed time or on demand, to the depositor named therein. Other instruments: Bond is an evidence of indebtedness issued by a corporation, public or private, payable at a definite date in the future, usually for a long term. It is in effect a written promise of the corporation to pay a definite sum of money. Draft is a form of bill of exchange used mainly in transactions between persons physically remote from each other. It is an order made by one person (e.g. buyer of goods) addressed to a person having in his possession funds of such buyer, ordering addressee to pay the purchase price to the seller of goods. o Where irder is made by one bank to another bank it is referred to as a bank draft. NON-NEGOTIABLE; EXCEPTION Estoppel see Banco de Oro v Equitable Bank

ROLE OF NEGOTIABLE; LEGAL TENDER Section 52, RA 7653 Legal Tender Power. All notes and coins issued by the Bangko Sentral shall be fully guaranteed by the Government of the Republic of the Philippines and shall be legal tender in the Philippines for all debts, both public and private: Provided, however, That, unless otherwise fixed by the Monetary Board, coins shall be legal tender in amounts not exceeding Fifty pesos (P50.00) for denominations of Twenty-five centavos and above, and in amounts not exceeding Twenty pesos (P20.00) for denominations of Ten centavos or less. Does not constitute as a legal tender but often take place of money as a means of payment. A 1249 of CC states that a delivery of promissory notes payable to order or bills of exchange and other mercantile documents shall produce the effect of payment only when they have been cashed or when through the fault of the creditor they have been impaired Tender of a check is sufficient to compel redemption of foreclosed property since such redemption is not an obligation but a

CHAPTER 2 FORMS AND INTERPRETATION


WRITTEN AND DULY SIGNED Section 18 Liability of person signing in trade or assumed name. - No person is liable on the instrument whose signature does not appear thereon, except as herein otherwise expressly provided. But one who signs in a trade or assumed name will be liable to the same extent as if he had signed in his own name. Section 19 Signature by agent; authority; how shown. - The signature of any party may be made by a duly authorized agent. No particular form of appointment is necessary for this purpose; and the authority of the agent may be established as in other cases of agency. In writing includes print and includes not only what is written with pen or pencil, but also what has been typed. Signature is binding whether it is ones handwriting, or printed, engraved, lithographed or photographed, as long as it is intended or adopted as the signature of the signer or made with his authority. Signature may appear on any part of the instrument (usually appears at lower right hand corner) If signature is so placed upon an instrument that it is not clear in what capacity the person intended to sign, he is deemed an indorser (Sec. 17f)

request or authority to pay does not constitute an order. But mere use of polite words does not deprive the instrument its characteristics as an order. When unconditional The promise or order to pay to be unconditional must be unqualified. o Rationale: realty increases the ability of a negotiable instrument to pass freely from one person to another. On bills of exchange, mere indication of the particular fund out of which reimbursement is to be made, or an indication of a particular account to be debited with the amount will not render an order unconditional. o Reimbursement also presupposes previous disbursement. o Note that reimbursement and debit refers to a separate transaction between the drawer and the drawee (Vasquez) o As a rule, unless reference to the fund clearly indicates an intention that such fund alone should be the source of payment, courts usually decide in favour of negotiability. Recital of the transaction for which the instrument was issued does not make the promise or order unconditional unless: o It appears through the recital that it qualifies the time of payment or the sum to be paid (Powell v Greenleaf) The fact that the condition appearing on the instrument has been fulfilled will not convert it to a negotiable one (Sec. 4)

UNCONDITIONAL ORDER OR PROMISE TO PAY Section 3 When promise is unconditional. - An unqualified order or promise to pay is unconditional within the meaning of this Act though coupled with: (a) An indication of a particular fund out of which reimbursement is to be made or a particular account to be debited with the amount; or (b) A statement of the transaction which gives rise to the instrument. But an order or promise to pay out of a particular fund is not unconditional. Mere acknowledgement of debt does not constitute a promise. There should be an express promise on the face of the instrument to pay the money. In a bill of exchange, words which are equivalent to an order are sufficient. Order is a command or imperative direction. Mere

CERTAIN SUM PAYABLE Section 2 What constitutes certainty as to sum. - The sum payable is a sum certain within the meaning of this Act, although it is to be paid: (a) with interest; or (b) by stated installments; or (c) by stated installments, with a provision that, upon default in payment of any installment or of interest, the whole shall become due; or (d) with exchange, whether at a fixed rate or at the current rate; or with costs of collection or an attorney's fee, in case payment shall not be made at maturity. The amount payable must be certain. Rationale: An instrument cannot function properly as a substitute for money unless

the amount for which it stands for is specified and definite. An agreement to pay interest does not render the sum uncertain. o Exact amount thereof can be computed without looking beyond the instrument. Stipulation to pay higher rate of interest if the note is not paid at maturity or a lower rate if it is paid on or before maturity does not render the instrument non-negotiable since it is entirely without force until either the maturity thereof or is payment before maturity. Sum is certain although payable in instalments as long as the latter are stated i.e. the amount of each instalment and its due date are fixed in the instrument. Acceleration provision based on default will not render sum uncertain. An instrument expressed in a foreign currency may contain a provision that the same is payable in Philippine currency at a fixed rate of exchange or at the rate current at the time payment is made. This provision does not affect the negotiability of the instrument. A provision in an instrument or attorneys fees, but leaving the amount thereof blank, amounts to a promise to pay a reasonable sum as attorneys fees and does not make instrument non- negotiable. Such amount may be fixed by the court.

Should be given to PAYEE not to MAKER or the person primarily liable

PAYABLE TO ORDER OR TO BEARER Section 8 When payable to order. - The instrument is payable to order where it is drawn payable to the order of a specified person or to him or his order. It may be drawn payable to the order of: (a) A payee who is not maker, drawer, or drawee; or (b) The drawer or maker; or (c) The drawee; or (d) Two or more payees jointly; or (e) One or some of several payees; or (f) The holder of an office for the time being. Where the instrument is payable to order, the payee must be named or otherwise indicated therein with reasonable certainty. Section 9 When payable to bearer. - The instrument is payable to bearer: (a) When it is expressed to be so payable; or (b) When it is payable to a person named therein or bearer; or (c) When it is payable to the order of a fictitious or non-existing person, and such fact was known to the person making it so payable; or (d) When the name of the payee does not purport to be the name of any person; or When the only or last indorsement is an indorsement in blank. Section 184 Promissory note, defined. A negotiable promissory note within the meaning of this Act is an unconditional promise in writing made by one person to another, signed by the maker, engaging to pay on demand, or at a fixed or determinable future time, a sum certain in money to order or to bearer. Where a note is drawn to the maker's own order, it is not complete until indorsed by him.

Payable in money In order to be negotiable, an instrument must be payable in money. Rationale: negotiable instruments are intended to be substitutes for money, to properly perform such function they must necessarily be capable of being transformed into money if holder so wishes. Money as used in the law means not only legal tender but any kind of current money. An instrument which contains an order or promise to do an act IN ADDITION to the payment of money is NOT negotiable. (Sec. 5) o Rationale: Retain simplicity of form which is absolutely necessary to the free use of negotiable instruments in the place of money. But if the order or promise gives the holder an election to require something to be done IN LIEU of payment of money, an instrument otherwise negotiable would not be affected thereby.

Instrument in order to be negotiable must contain the words of negotiability i.e. must be payable to order or bearer. These words serve as an expression of consent that the instrument may be transferred. Note that the instrument need not follow the language of the law, but any term

which clearly indicates an intention to conform to the legal requirements is sufficient (Sec. 10) When instrument payable to order Two ways by which an instrument may be made payable to order: o It is drawn payable to the order of a specified person; and o It is drawn payable to the order of a specified person or his order. Without the words to order or to the order of, the instrument is payable only to the person designated therein and is therefore non-negotiable. o Subsequent purchaser mere assignor not holder.

Pay to cash or pay or sundries. It is presumed that the maker or drawer, by using an impersonal payee, intends the instrument to be payable to bearer. Sec. 9(e) When the last or only indorsement is an indorsement in blank, the instrument becomes payable to bearer even if originally payable to order of a specified person. A blank instrument cannot however convert a non-negotiable note to a negotiable one. NOTE: Only instruments under Sec. 9 a and b are expressly made payable to bearer. CERTAIN DESIGNATION OF PARTIES

When instrument payable to bearer Examples: Sec. 9(a) I promise to pay bearer/ holder the sum of P100 Sec 9(b) Pay to Jose Reyes or bearer Sec 9(c) Pay to John Doe or order A name is fictitious when it is feigned or pretended Requisite: o The fact that the payee is a fictitious or non-existing person must be known to the maker or drawer o The theory is that since the payee is not capable of indorsing and since the maker or drawer knew of this fact, he must have intended the instrument to be transferred by mere delivery If the maker or drawer is no aware that the person he named as payee is fictitious or non-existent, then the instrument is not a bearer instrument but an order one. A note payable to the order of an estate of a person still alive at the time of the execution of the note has been held to constitute a valid bearer paper, since it is payable to a non-existing person. A note payable to the order of the estate of an already deceased person, although not an order note because the name of the payee does not purport to be the name of any person. Sec. 9(d)

Maker of a note or the drawer of a bill must sign the instrument (usually at lower righthand corner) Drawees name lower left hand corner, although in checks the banks name sometimes appears across the top The payee and successive indorsees negotiate the instrument by signing on the back As long as parties to the bill or note comply with these long established and recognized customs, it would be clear in what capacity the parties signed. However, once a party to an instrument deviates from the commercial usage with respect to the place of signature, and is not clear from the instrument in what capacity he signs, ambiguity arises. The law solves this by considering such a person as an indorser and not as a maker or drawer.

Section 8 When payable to order. - The instrument is payable to order where it is drawn payable to the order of a specified person or to him or his order. It may be drawn payable to the order of: (g) A payee who is not maker, drawer, or drawee; or (h) The drawer or maker; or (i) The drawee; or (j) Two or more payees jointly; or (k) One or some of several payees; or (l) The holder of an office for the time being. Where the instrument is payable to order, the payee must be named or otherwise indicated therein with reasonable certainty.

An instrument may be made payable to anyone of the following as payees: to the order of payee who is not a maker, drawer, or drawee to the order of maker or the drawer to the order of the drawee to two or more payees jointly o Pay to the order of Juan Cruz and Jose Santos (jointly not alternative) to one or some of several payees in alternative o Pay to the order of Juan Cruz or Jose Santos o Only one of them may demand payment for the full amount o Only one of them need to indorse when negotiating the instrument to the holder of an office for the time being o Campos views this as a floating promise the payee may be the person who happens to be secretary at any particular moment Section 128 Bill addressed to more than one drawee. A bill may be addressed to two or more drawees jointly, whether they are partners or not; but not to two or more drawees in the alternative or in succession. Section 130 When bill may be treated as promissory note. Where in a bill the drawer and drawee are the same person or where the drawee is a fictitious person or a person not having capacity to contract, the holder may treat the instrument at his option either as a bill of exchange or as a promissory note. When instrument is addressed to a drawee, he must be name or otherwise indicated therein with reasonable certainty. May be addressed to two or more drawees jointly i.e. To Juan Cruz and Jose Reyes But not to two or more drawees in the alternative or in succession Where drawer and drawee are the same person, or where the drawee is a fictitious, or a person having no capacity to contract, the holder may treat the instrument either as a bill or a note because otherwise no one can ever be made primarily liable on the bill

At a fixed period after date or sight; or (b) On or before a fixed or determinable future time specified therein; or (c) On or at a fixed period after the occurrence of a specified event which is certain to happen, though the time of happening be uncertain. An instrument payable upon a contingency is not negotiable, and the happening of the event does not cure the defect. Section 11 Date, presumption as to. - Where the instrument or an acceptance or any indorsement thereon is dated, such date is deemed prima facie to be the true date of the making, drawing, acceptance, or indorsement, as the case may be. Section 17 Construction where instrument is ambiguous. Where the language of the instrument is ambiguous or there are omissions therein, the following rules of construction apply: (a) Where the sum payable is expressed in words and also in figures and there is a discrepancy between the two, the sum denoted by the words is the sum payable; but if the words are ambiguous or uncertain, reference may be had to the figures to fix the amount; (b) Where the instrument provides for the payment of interest, without specifying the date from which interest is to run, the interest runs from the date of the instrument, and if the instrument is undated, from the issue thereof; (c) Where the instrument is not dated, it will be considered to be dated as of the time it was issued; (d) Where there is a conflict between the written and printed provisions of the instrument, the written provisions prevail; (e) Where the instrument is so ambiguous that there is doubt whether it is a bill or note, the holder may treat it as either at his election; (f) Where a signature is so placed upon the instrument that it is not clear in what capacity the person making the same intended to sign, he is to be deemed an indorser; Where an instrument containing the word "I promise to pay" is signed by two or more persons, they are deemed to be jointly and severally liable thereon.

(a)

CERTAIN TIMES OF PAYMENT Section 4 Determinable future time; what constitutes. An instrument is payable at a determinable future time, within the meaning of this Act, which is expressed to be payable:

PROVISIONS AFFECTING NEGOTIABILITY Section 5 Additional provisions not affecting negotiability. - An instrument which contains an order or promise to do any act in addition to the payment of money is not negotiable. But the negotiable character of an instrument otherwise negotiable is not affected by a provision which: (a) authorizes the sale of collateral securities in case the instrument be not paid at maturity; or (b) authorizes a confession of judgment if the instrument be not paid at maturity; or (c) waives the benefit of any law intended for the advantage or protection of the obligor; or (d) gives the holder an election to require something to be done in lieu of payment of money. But nothing in this section shall validate any provision or stipulation otherwise illegal. OMISSIONS Section 6 Omissions; seal; particular money. - The validity and negotiable character of an instrument are not affected by the fact that: (a) it is not dated; or (b) does not specify the value given, or that any value had been given therefor; or (c) does not specify the place where it is drawn or the place where it is payable; or (d) bears a seal; or (e) designates a particular kind of current money in which payment is to be made. But nothing in this section shall alter or repeal any statute requiring in certain cases the nature of the consideration to be stated in the instrument. DATES OF INSTRUMENT Section 11 Date, presumption as to. - Where the instrument or an acceptance or any indorsement thereon is dated, such date is deemed prima facie to be the true date of the making, drawing, acceptance, or indorsement, as the case may be. Section 12 Ante-dated and post-dated. - The instrument is not invalid for the reason only that it is antedated or post-dated, provided this is not done for an illegal or fraudulent purpose. The person to whom an instrument so dated is delivered acquires the title thereto as of the date of delivery. Section 13 When date may be inserted. - Where an

instrument expressed to be payable at a fixed period after date is issued undated, or where the acceptance of an instrument payable at a fixed period after sight is undated, any holder may insert therein the true date of issue or acceptance, and the instrument shall be payable accordingly. The insertion of a wrong date does not avoid the instrument in the hands of a subsequent holder in due course; but as to him, the date so inserted is to be regarded as the true date. BLANKS; WHEN FILED Section 14 Blanks; when may be filled. - Where the instrument is wanting in any material particular, the person in possession thereof has a prima facie authority to complete it by filling up the blanks therein. And a signature on a blank paper delivered by the person making the signature in order that the paper may be converted into a negotiable instrument operates as a prima facie authority to fill it up as such for any amount. In order, however, that any such instrument when completed may be enforced against any person who became a party thereto prior to its completion, it must be filled up strictly in accordance with the authority given and within a reasonable time. But if any such instrument, after completion, is negotiated to a holder in due course, it is valid and effectual for all purposes in his hands, and he may enforce it as if it had been filled up strictly in accordance with the authority given and within a reasonable time. INCOMPLETE INSTRUMENTS Section 15 Incomplete instrument not delivered. - Where an incomplete instrument has not been delivered, it will not, if completed and negotiated without authority, be a valid contract in the hands of any holder, as against any person whose signature was placed thereon before delivery. CONSTRUCTION Section 17 Construction where instrument is ambiguous. Where the language of the instrument is ambiguous or there are omissions therein, the following rules of construction apply: (g) Where the sum payable is expressed in words and also in figures and there is a discrepancy between the two, the sum denoted by the words is the sum payable; but if the words are ambiguous or uncertain, reference may be had to the figures to fix the amount; (h) Where the instrument provides for the payment of interest, without

specifying the date from which interest is to run, the interest runs from the date of the instrument, and if the instrument is undated, from the issue thereof; (i) Where the instrument is not dated, it will be considered to be dated as of the time it was issued; (j) Where there is a conflict between the written and printed provisions of the instrument, the written provisions prevail; (k) Where the instrument is so ambiguous that there is doubt whether it is a bill or note, the holder may treat it as either at his election; (l) Where a signature is so placed upon the instrument that it is not clear in what capacity the person making the same intended to sign, he is to be deemed an indorser; Where an instrument containing the word "I promise to pay" is signed by two or more persons, they are deemed to be jointly and severally liable thereon.

value has at any time been given for the instrument, the holder is deemed a holder for value in respect to all parties who become such prior to that time. LIEN HOLDER; HOLDER FOR VALUE Section 27 When lien on instrument constitutes holder for value. Where the holder has a lien on the instrument arising either from contract or by implication of law, he is deemed a holder for value to the extent of his lien. EFFECT OF WANT OF CONSIDERATION Section 28 Effect of want of consideration. - Absence or failure of consideration is a matter of defense as against any person not a holder in due course; and partial failure of consideration is a defense pro tanto, whether the failure is an ascertained and liquidated amount or otherwise. ACCOMMODATION PARTY Section 29 Liability of accommodation party. - An accommodation party is one who has signed the instrument as maker, drawer, acceptor, or indorser, without receiving value therefor, and for the purpose of lending his name to some other person. Such a person is liable on the instrument to a holder for value, notwithstanding such holder, at the time of taking the instrument, knew him to be only an accommodation party.

CHAPTER 3 CONSIDERATION
PRESUMPTION Section 24 Presumption of consideration. Every negotiable instrument is deemed prima facie to have been issued for a valuable consideration; and every person whose signature appears thereon to have become a party thereto for value. VALUE Section 25 Value, what constitutes. Value is any consideration sufficient to support a simple contract. An antecedent or pre-existing debt constitutes value; and is deemed such whether the instrument is payable on demand or at a future time. HOLDER FOR VALUE Section 26 What constitutes holder for value. - Where

CHAPTER 4 TRANSFER AND NEGOTIATION


ISSUANCE AND DELIVERY Section 16 Delivery; when effectual; when presumed. Every contract on a negotiable instrument is incomplete and revocable until delivery of the instrument for the purpose of giving effect thereto. As between immediate parties and as regards a remote party other than a holder in due course, the delivery, in order to be effectual, must be made either by or under the authority of the party making, drawing, accepting, or indorsing, as the case may be; and, in such case, the delivery may be shown to have been conditional, or for a special purpose only, and not for the purpose of transferring the property in the instrument. But where the instrument is in the hands of a holder in due course, a valid delivery thereof by all parties prior to him so as to make them liable to him is conclusively presumed. And where the instrument is no longer in the possession of a party whose signature appears thereon, a valid

and intentional delivery by him is presumed until the contrary is proved. Section 191 Definition and meaning of terms. - In this Act, unless the contract otherwise requires: "Acceptance" means an acceptance completed by delivery or notification; "Action" includes counterclaim and set-off; "Bank" includes any person or association of persons carrying on the business of banking, whether incorporated or not; "Bearer" means the person in possession of a bill or note which is payable to bearer; "Bill" means bill of exchange, and "note" means negotiable promissory note; "Delivery" means transfer of possession, actual or constructive, from one person to another; "Holder" means the payee or indorsee of a bill or note who is in possession of it, or the bearer thereof; "Indorsement" means an indorsement completed by delivery; "Instrument" means negotiable instrument; "Issue" means the first delivery of the instrument, complete in form, to a person who takes it as a holder; "Person" includes a body of persons, whether incorporated or not; "Value" means valuable consideration; "Written" includes printed, and "writing" includes print. NEGOTIATION; HOLDER Section 30 What constitutes negotiation. - An instrument is negotiated when it is transferred from one person to another in such manner as to constitute the transferee the holder thereof. If payable to bearer, it is negotiated by delivery; if payable to order, it is negotiated by the indorsement of the holder and completed by delivery. INDORSEMENT By Signature on Instrument or On Allonge Section 31 Indorsement; how made. - The indorsement must be written on the instrument itself or upon a paper attached thereto. The signature of the indorser, without additional words, is a sufficient indorsement. Where Name is Misspelled Section 43 Indorsement where name is misspelled, and so forth. - Where the name of a payee or indorsee is wrongly designated or misspelled, he may indorse the instrument as therein described adding, if he thinks fit, his proper signature.

INDORSEMENT MUST BE ENTIRE INSTRUMENT Section 32 Indorsement must be of entire instrument. - The indorsement must be an indorsement of the entire instrument. An indorsement which purports to transfer to the indorsee a part only of the amount payable, or which purports to transfer the instrument to two or more indorsees severally, does not operate as a negotiation of the instrument. But where the instrument has been paid in part, it may be indorsed as to the residue. KINDS OF INDORSEMENTS Section 33 Kinds of indorsement. - An indorsement may be either special or in blank; and it may also be either restrictive or qualified or conditional. Special and Blank Indorsements Section 34 Special indorsement; indorsement in blank. - A special indorsement specifies the person to whom, or to whose order, the instrument is to be payable, and the indorsement of such indorsee is necessary to the further negotiation of the instrument. An indorsement in blank specifies no indorsee, and an instrument so indorsed is payable to bearer, and may be negotiated by delivery. Section 35 Blank indorsement; how changed to special indorsement. - The holder may convert a blank indorsement into a special indorsement by writing over the signature of the indorser in blank any contract consistent with the character of the indorsement. Payable to Bearer Section 40 Indorsement of instrument payable to bearer. Where an instrument, payable to bearer, is indorsed specially, it may nevertheless be further negotiated by delivery; but the person indorsing specially is liable as indorser to only such holders as make title through his indorsement. Restrictive Indorsement Section 36 When indorsement restrictive. - An indorsement is restrictive which either: (a) Prohibits the further negotiation of the instrument; or (b) Constitutes the indorsee the agent of the indorser; or

(c) Vests the title in the indorsee in trust for


or to the use of some other persons. But the mere absence of words implying power to negotiate does not make an indorsement restrictive. Section 37 Effect of restrictive indorsement; rights of indorsee. - A restrictive indorsement confers upon the indorsee the right: (a) to receive payment of the instrument; (b) to bring any action thereon that the indorser could bring; (c) to transfer his rights as such indorsee, where the form of the indorsement authorizes him to do so. But all subsequent indorsees acquire only the title of the first indorsee under the restrictive indorsement. QUALIFIED INDORSEMENTS Section 38 Qualified indorsement. A qualified indorsement constitutes the indorser a mere assignor of the title to the instrument. It may be made by adding to the indorser's signature the words "without recourse" or any words of similar import. Such an indorsement does not impair the negotiable character of the instrument. CONDITIONAL INDORSEMENT Section 39 Conditional indorsement. Where an indorsement is conditional, the party required to pay the instrument may disregard the condition and make payment to the indorsee or his transferee whether the condition has been fulfilled or not. But any person to whom an instrument so indorsed is negotiated will hold the same, or the proceeds thereof, subject to the rights of the person indorsing conditionally. INDORSEMENT TO OR BY COLLECTING BANK UNINDORSED INSTRUMENTS Section 49 Transfer without indorsement; effect of. - Where the holder of an instrument payable to his order transfers it for value without indorsing it, the transfer vests in the transferee such title as the transferor had therein, and the transferee acquires in addition, the right to have the indorsement of the transferor. But for the purpose of determining whether the transferee is a holder in due course, the negotiation takes effect as of the time when the indorsement is actually made. CANCELLATION OF INDORSEMENTS

Section 48 Striking out indorsement. - The holder may at any time strike out any indorsement which is not necessary to his title. The indorser whose indorsement is struck out, and all indorsers subsequent to him, are thereby relieved from liability on the instrument. INDORSEMENT BY AGENT Section 44 Indorsement in representative capacity. Where any person is under obligation to indorse in a representative capacity, he may indorse in such terms as to negative personal liability. Section 20 Liability of person signing as agent, and so forth. - Where the instrument contains or a person adds to his signature words indicating that he signs for or on behalf of a principal or in a representative capacity, he is not liable on the instrument if he was duly authorized; but the mere addition of words describing him as an agent, or as filling a representative character, without disclosing his principal, does not exempt him from personal liability. PRESUMPTION AS TO INDORSEMENTS Time Section 45 Time of indorsement; presumption. - Except where an indorsement bears date after the maturity of the instrument, every negotiation is deemed prima facie to have been effected before the instrument was overdue. Place Section 46 Place of indorsement; presumption. - Except where the contrary appears, every indorsement is presumed prima facie to have been made at the place where the instrument is dated. Payee Section 42 Effect of instrument drawn or indorsed to a person as cashier. - Where an instrument is drawn or indorsed to a person as "cashier" or other fiscal officer of a bank or corporation, it is deemed prima facie to be payable to the bank or corporation of which he is such officer, and may be negotiated by either the indorsement of the bank or corporation or the indorsement of the officer. CONTINUATION OF NEGOTIABLE CHARACTER Section 47 Continuation of negotiable character. - An instrument negotiable in its origin continues to be negotiable until it has been restrictively

indorsed or otherwise.

discharged

by

payment

or

CHAPTER 5 HOLDER IN DUE COURSE


HOLDER Section 191 "Holder" means the payee or indorsee of a bill or note who is in possession of it, or the bearer thereof; HOLDER FOR VALUE Section 26 What constitutes holder for value. - Where value has at any time been given for the instrument, the holder is deemed a holder for value in respect to all parties who become such prior to that time. HOLDER IN DUE COURSE Section 52

What constitutes a holder in due course. - A holder in due course is a holder who has taken the instrument under the following conditions: (a) That it is complete and regular upon its face; (b) That he became the holder of it before it was overdue, and without notice that it has been previously dishonored, if such was the fact; (c) That he took it in good faith and for value; (d) That at the time it was negotiated to him, he had no notice of any infirmity in the instrument or defect in the title of the person negotiating it. Section 53 When person not deemed holder in due course. - Where an instrument payable on demand is negotiated on an unreasonable length of time after its issue, the holder is not deemed a holder in due course. Rights

negotiable instrument is deemed prima facie to have been issued for a valuable consideration; and every person whose signature appears thereon to have become a party thereto for value. Section 25 Value, what constitutes. Value is any consideration sufficient to support a simple contract. An antecedent or pre-existing debt constitutes value; and is deemed such whether the instrument is payable on demand or at a future time. Section 26 What constitutes holder for value. - Where value has at any time been given for the instrument, the holder is deemed a holder for value in respect to all parties who become such prior to that time. Section 27 When lien on instrument constitutes holder for value. Where the holder has a lien on the instrument arising either from contract or by implication of law, he is deemed a holder for value to the extent of his lien. What constitutes value Value means valuable consideration any consideration sufficient to support a simple contract VASQUEZ: includes liberality BUT CAMPOS: In cases where a negotiable instrument is given as a gift to the indorsee or transferee, whatever defenses that can be set up against the transferor can also be set up against the transferee. Value and consideration are generally convertible terms. But: Consideration is more proper term when the payee of the note sues the maker, or the payee of a bill sues the drawer, or an indorsee sues his immediate indorser. Value is more appropriate where a holder sues any party to the instrument with whom he himself has not dealt Value need not be full and a holder will be one for value even if he gave less than the face value of the instrument, provided that the intention of the transferor is to transfer the fill amount represented by the instrument.

A holder in due course can acquire a better title than his predecessors because he takes the instrument free from any defect of title of prior parties. He is also free from defenses available to prior parties among themselves.

Defenses A holder NOT in due course takes instrument subject to all defenses because he is treated as a transferee of a nonnegotiable paper. Real defenses which attach to the instrument itself would be available even against a holder in due course. Negotiability The fact that a holder is not a holder in due course will not affect the negotiability of the instrument. o Only affects such holders rights and does not necessarily prevent subsequent holders from acquiring the status of due course holders

NOTE: Question of WON a holder is a holder in due course is significant only when there is existing defense between prior parties. If there is no such defense and the instrument is completely valid, then it will not matter WON a holder is a holder in due course. HOLDER FOR VALUE Section 24 Presumption of consideration.

Every

Bank credit as value When the holder of a check deposits it with his bank (assuming it is not the drawee bank) and the bank credits it to his account, is the bank at this stage a holder for value? CAMPOS: Most courts hold that it is not on the theory that the bank has parted with nothing and that the crediting is a mere bookkeeping entry. The bank becomes a holder for value only when the depositor withdraws the amount of the deposited instrument. VASQUEZ: If bank credits in advance prior to clearing a holder. If waits for clearing not a holder. IN GOOD FAITH Section 55 When title defective. - The title of a person who negotiates an instrument is defective within the meaning of this Act when he obtained the instrument, or any signature thereto, by fraud, duress, or force and fear, or other unlawful means, or for an illegal consideration, or when he negotiates it in breach of faith, or under such circumstances as amount to a fraud. Section 56 What constitutes notice of defect. - To constitutes notice of an infirmity in the instrument or defect in the title of the person negotiating the same, the person to whom it is negotiated must have had actual knowledge of the infirmity or defect, or knowledge of such facts that his action in taking the instrument amounted to bad faith. In order to constitute notice, the holder must have ACTUAL not merely constructive knowledge of the defect, or he must have acted in bad faith. Gross negligence in itself would not constitute notice since it is not the equivalent of bad faith nor actual knowledge. Notice, bad faith Test established in Sec. 56 is subjective. Bad faith being a state of mind can only be proven by circumstantial evidence. It is a question of fact which must be determined in accordance with the particular circumstances of each case. Article 1338, CC There is fraud when, through insidious words or machinations of one of the contracting parties,

the other is induced to enter into a contract which, without them, he would not have agreed to. (1269) Article 1344, CC In order that fraud may make a contract voidable, it should be serious and should not have been employed by both contracting parties. Incidental fraud only obliges the person employing it to pay damages. (1270) Holder must have taken the instrument in good faith and that at the time it was negotiated to him he had no notice of any infirmity in the instrument or defect in the title of the person negotiating it. Due course holding is NOT affected by the holders acquisition of knowledge AFTER he has taken the instrument. Crossing a Check; Bad Faith Financing Company; Holder in Good faith Tendency of courts is to protect the buyer against the finance company in the event that the goods sold turn out to be defective. The finance company will be subject to the defense of failure of consideration and cannot recover the purchase price from the buyer. NOTE: Article 146 of Consumers Act - Sale of Consumer Products On Instalment Payment. In a consumer credit sale other than one pursuant to an open-end credit plan, the obligation of the consumer to whom credit is being extended shall be evidenced by a single instrument which shall include, in addition to the disclosures required by this act, the signature of the seller and the person to whom credit is extended, the date it was signed, a description of the property sold and a description of any property transferred as a trade-in. The instrument evidencing the credit shall contain a clear and conspicuous typewritten notice to the person to whom credit is being extended that: a) he should not sign the instrument if it contains any blank space; b) he is entitled to a reasonable return of the precomputed finance charge if the balance is prepaid; and c) he is entitled to an exact, true copy of the agreement. In cases where the instrument will be sold at a discount to a bank, financing company or other lender, the said transferee shall be subject to all claims and defenses which the debtor could

assert against the seller of consumer products obtained hereto or with the proceeds thereof. Postdating a Check Section 12 Ante-dated and post-dated. - The instrument is not invalid for the reason only that it is antedated or post-dated, provided this is not done for an illegal or fraudulent purpose. The person to whom an instrument so dated is delivered acquires the title thereto as of the date of delivery. Antedated instruments If an instrument bears a date earlier than the date of its actual issuance Postdated If an instrument contains a date later than the date of its issuance The instrument is not only valid but negotiable though it is antedated or postdated. A holder thereof can therefore be holder in due course, and he is not put on inquiry by the mere fact of its being antedated or postdated. e.g. an instrument which is antedated in order to evade the effects of the Usury Law Illegal under this section Suspicious circumstances Negligence in tracking down a suspicious circumstance which would put a prudent man on inquiry is not of itself sufficient to prevent recovery, though it may properly be admitted together with other circumstances as evidence of bad faith. But where the suspicious circumstances are so cogent and obvious that to remain passive would amount to bad faith, the holder would be subject to defences. There is difference between the existence of suspicious circumstances and actual suspicion of the purchaser. If he does in fact suspect and fails to make investigation lest it disclose a defense, he is not a purchaser in good faith. In order to show that the defendant had knowledge of such facts that his action in taking the instrument amounted to bad faith it is not necessary to prove that the defendant knew the exact fraud that was practiced upon the plaintiff by the defendants assignor, it being sufficient to show that the defendant had notice that there was

something wrong about his assignors acquisition of title, although he did not have notice of the particular wrong that was committed. Bad faith may under certain circumstances be imputed from knowledge of the purchaser of other suspicious transactions of the transferor. Effect of Purchase at a Discount The purchase of an instrument at a discount does not, of itself, constitute bad faith. In most cases a purchaser at a discount is influenced by the financial condition of the issuer of the instrument rather than by the possibility that it was obtained subject to defense. However, if the instrument is purchased at a heavy discount, this fact together with other facts, may be taken into account in deciding the issue of purchase in good faith. Eg. Purchase at a discount although maker is known to be: Solvent, Note is amply secured Or is taken from a total stranger These additional circumstances taken with the fact of heavy discount might prove bad faith. Effect of Notice Not Sufficient Section 54 Notice before full amount is paid. - Where the transferee receives notice of any infirmity in the instrument or defect in the title of the person negotiating the same before he has paid the full amount agreed to be paid therefor, he will be deemed a holder in due course only to the extent of the amount therefore paid by him. Notice of defenses to a purchaser before he has acquired title and before he has paid any portion of the purchase price is fully operative to prevent him from being a holder in due course. But where he receives such notice after he has partially paid the instrument, he is a holder in due course as to such amount paid by him. Should he pay the remainder despite notice he cannot thereafter recover such amount from the maker because to that extent, he will be subject to the defences which the maker may have. Constructive Notice Not Sufficient Just as a purchaser of a negotiable instrument is not put on inquiry, neither he is charged with notice of defenses or equities disclosed by public

records nor is he affected by the doctrine of lis pendens. Notice to agent is chargeable against the principal Notice of Accommodation Not Notice of Defect Section 29 Liability of accommodation party. - An accommodation party is one who has signed the instrument as maker, drawer, acceptor, or indorser, without receiving value therefor, and for the purpose of lending his name to some other person. Such a person is liable on the instrument to a holder for value, notwithstanding such holder, at the time of taking the instrument, knew him to be only an accommodation party. A holders title is not rendered defective by his knowledge that the party sought to be held liable was an accommodation party. Also it does not prevent such holder from being a holder in due course. COMPLETE AND REGULAR; MATERIAL ALTERATION Section 124 Alteration of instrument; effect of. - Where a negotiable instrument is materially altered without the assent of all parties liable thereon, it is avoided, except as against a party who has himself made, authorized, or assented to the alteration and subsequent indorsers. But when an instrument has been materially altered and is in the hands of a holder in due course not a party to the alteration, he may enforce payment thereof according to its original tenor. Holder must have taken the instrument complete and regular on its face. If a purchaser of a negotiable paper takes prior to completion or contemporaneously with the act of completion, he is not a holder in due course. Mere failure to affix revenue stamps as required by law does not render the instrument incomplete. An instrument payable in __(blank)___ days after date is NOT complete and regular on its face. Where it specifies the date but not the year of maturity, it is also not complete. Also when it is blank as to the payee, although the holder can sue on the said instrument without filling in the payees name (?) Where the instrument is executed in blank and is subsequently filled up and issued to the first holder who has no knowledge of

execution in blank, the holder is a holder in due course. If the first holder takes the instrument complete in form with knowledge of original execution in blank, he is not a holder in due course, although he actually took it complete. Taking of an incomplete instrument lets in all defenses and equities, WON connected with the execution in blank. Same rule when holder takes and instrument irregular on its face: o E.g. alteration which is apparent on the instrument.

Section 125 What constitutes a material alteration. - Any alteration which changes: (a) The date; (b) The sum payable, either for principal or interest; (c) The time or place of payment: (d) The number or the relations of the parties; (e) The medium or currency in which payment is to be made; (f) Or which adds a place of payment where no place of payment is specified, or any other change or addition which alters the effect of the instrument in any respect, is a material alteration. See Sec. 124: If alteration is apparent on the instrument, it renders the instrument irregular within Sec. 52(a), even if the change may have been authorized or assented. And this puts the purchaser on inquiry as to all defenses and equities, WON connected with the alteration. If the unauthorized alteration is BOTH APPARENT and MATERIAL, then not only is the holder deprived of the rights of a holder in due course, but the instrument is entirely void and is a real defense against enforcement. Sec 52 (a) deals with matters evidencing bad faith which are to be found on the instrument Sec 52 (c) and (d) and Sec 56 deal with the issues of bad faith where the evidence thereof is not on the face of the instrument, but lies in extrinsic circumstances. HOLDER AT OR AFTER MATURITY AND WITHOUT NOTICE OF DISHONOR Section 53 When person not deemed holder in due course. - Where an instrument payable on demand is

negotiated on an unreasonable length of time after its issue, the holder is not deemed a holder in due course.

Under Sec 52(b) a holder in order to be a holder in due course must become a holder of the instrument before it is overdue and without notice that it has been previously dishonoured if such was the fact. The fact that the instrument is overdue is a strong indication that it was dishonoured and the law puts the potential holder on inquiry as to whether it was dishonoured and the reason therefor. An instrument may be dishonoured: o By Non-acceptance Can refer only to a bill of exchange takes place when the drawee refuses to accept the order of the drawer as stated in the bill. This may occur even before the date of maturity of the bill. o By non-payment Occurs at the time of maturity When the party primarily liable i.e. the maker of the note, or the acceptor of the bill, fails to pay the instrument at the date of maturity.

With regard to the nature of the instrument, it is the function of the instrument which must be noted in determining whether reasonable time has elapsed or not. Evidence as to usage of trade or business is admissible to show lapse of reasonable time, and it is not sufficient that such usage is general but it should be local in the sense that it may not be the same in all localities. Facts of the particular case will vary in each case.

Payment of interest may be an important factor in determining reasonableness of time With respect to instruments with a fixed maturity but subject to acceleration, either automatically or at the option of the holder, the ultimate date of maturity is the date of maturity for the purpose of determining whether a purchaser is a holder in due course, UNLESS such purchaser had knowledge of earlier maturity at the time he acquired title. RIGHTS OF A HOLDER IN DUE COURSE Section 57 Rights of holder in due course. - A holder in due course holds the instrument free from any defect of title of prior parties, and free from defenses available to prior parties among themselves, and may enforce payment of the instrument for the full amount thereof against all parties liable thereon. Section 58 When subject to original defense. - In the hands of any holder other than a holder in due course, a negotiable instrument is subject to the same defenses as if it were non-negotiable. But a holder who derives his title through a holder in due course, and who is not himself a party to any fraud or illegality affecting the instrument, has all the rights of such former holder in respect of all parties prior to the latter. EFFECT OF QUALIFIED CONDITIONAL AND RESTRICTIVE INDORSEMENTS The status of a holder as a holder in due course is not affected by his taking under qualified indorsement. o Does not necessarily imply that there is a defect in the instrument or in the title of any prior party Conditional indorsement does not by itself deprive the conditional indorsee or any subsequent holder of the rights of a holder in due course.

NOTE: An instrument is not overdue on the day of its maturity. If instrument is payable after sight The date of maturity is fixed by the date of presentment If instrument is payable on the occurrence The date of the instrument is fixed by the happening of the event Purchase made outside reasonable time If the purchase of a demand instrument is made outside of the reasonable time after issue, the purchase is one of an overdue instrument. Usage of time o Sec 193 provides that regard is to be had to: the nature of the instrument, the usage of trade or business with respect to such instrument and the fact of the particular case

The fact that a condition is imposed on the indorsee does not necessarily mean that there is some defect in the title or infirmity in the instrument. It merely subjects him to the rights of the conditional indorser should he receive payment before condition is fulfilled. Restrictive indorsement which prohibits further negotiation will not prevent the indorsee from being a holder in due course. However, should he violate the prohibition and indorse the instrument to another, then the latter cannot be a holder in due course. o There is no valid negotiation. Transferee will never be a holder o The restrictive indorsement serves as a notice to any prospective purchaser of the instrument of the prohibition to negotiate A restrictive indorsement which constitutes the indorsee as an agent of the indorser can vest the former with the rights of a holder in due course, if his principal, the restrictive indorser, is a holder in due course. If restrictive indorser is not a holder in due course, neither is the restrictive indorsee, since he merely is an agent of the indorser. o Any subsequent holder from the indorsee-agent will have the same rights as the latter. But such subsequent holder can never acquire rights which are antagonistic to the indorserprincipal, for he is merely a subagent of the latter. Where the restrictive indorsement vests title in the indorsee in trust for a third person can be a holder in due course, regardless of the status of the restrictive indorser. o

of any holder other than a holder in due course, a negotiable instrument is subject to the same defenses as if it were non-negotiable. But a holder who derives his title through a holder in due course, and who is not himself a party to any fraud or illegality affecting the instrument, has all the rights of such former holder in respect of all parties prior to the latter. A holder who derives title to the instrument through a holder in due course has all the rights of the latter even though he himself satisfies none of the requirements of due course holding. A purchaser with notice of defect in title who takes from a holder in due course, acquires all the rights of the latter and is free from defenses. A purchaser after maturity from a holder in due course, WON he took with notice acquires all the rights of the latter and is free from defenses. A holder not for value who takes from a holder in due course, WON he takes the instrument before maturity and with or without notice, acquires all the rights of the latter and is free from defenses. RATIO: If a holder in due course cannot invest his transferee with the rights which come with his improved position, his status as a holder in due course would oftentimes lose its significance because the marketability of the instrument would be seriously hampered. NOTE: If the purchaser from a holder in due course is party to the fraud or illegality affecting the instrument, he does not acquire the rights of his predecessor. A payee whose title was defective at the time the instrument was issued to him cannot better it by selling the instrument to a holder in due course and buying it back again. A person not an original party to the instrument but who was a party to the fraud in procuring it, cannot later recover on the instrument, even if he purchased it from a holder in due course. PRESUMPTION IN FAVOR OF DUE COURSE HOLDING Section 59 Who is deemed holder in due course. - Every holder is deemed prima facie to be a holder in due course; but when it is shown that the title of any person who has negotiated the instrument was defective, the burden is on the holder to prove that he or some person under

PAYEE AS HOLDER IN DUE COURSE GR: A payee cannot be a holder in due course because he has dealt directly with the maker or drawer and thus must have knowledge of facts which may create defense. XPN: Circumstances which he is insulated from the maker or drawer by a third party, such as a remitter. Hence provided he meets requirement in Sec. 52, weight of authority considers him a holder in due course. RIGHTS OF A PURCHASER FROM A HOLDER IN DUE COURSE Section 58 When subject to original defense. - In the hands

whom he claims acquired the title as holder in due course. But the last-mentioned rule does not apply in favor of a party who became bound on the instrument prior to the acquisition of such defective title. The presumption established by this provision applies in favour of holders only and not to other kinds of transferees. Before the presumption can be availed of by the plaintiff, he must prove: That he is a holder The genuineness of the makers or drawers signature to establish, at least presumptively, the existence of the obligation The genuineness of all indorsements necessary to his title, to establish his link to the maker and thus his status as a holder. Once the plaintiff proves that he is a holder, then the presumption that he is a holder in due course arises. If the defendant claims to have a personal defense, he will have to prove it. Should he succeed in doing so, the burden of proving due course holding will be on the plaintiffholder. The law, however, in the second sentence of Sec. 59, establishes an exception to the last mentioned rule where the defendants defense is not his own i.e. the burden of proving due course holding will not be on the plaintiff if the defendant became bound on the instrument prior to the acquisition of the defective title. The presumption refers only to the status of the present holder and not to any previous holder. Thus if the present holders rights depend on a previous holders status as a holder in due course, he would have to prove such fact and cannot rely on the presumption because the latter is no longer the holder. TRANSFER OF UNINDORSED INSTRUMENT Section 49 Transfer without indorsement; effect of. - Where the holder of an instrument payable to his order transfers it for value without indorsing it, the transfer vests in the transferee such title as the transferor had therein, and the transferee acquires in addition, the right to have the indorsement of the transferor. But for the purpose of determining whether the transferee is a holder in due course, the negotiation takes effect as of the time when the indorsement is actually made.

WON transferee under this section would acquire the rights of holder in due course under Sec. 58 if his transferor is a holder in due course: Two views: 1st view: Since Sec. 58 favors a holder, it cannot apply to one who is not a holder like a transferee without indorsement. Sec. 49 grants such transferee the title but not necessarily the all the rights of the transferor. In order to acquire the rights of a prior holder in due course, the transferee must first acquire the latters indorsement. 2nd view: Sec. 49 and 58 taken together give him the title of the previous holder in due course free from defences and equities of prior parties. o The Uniform Commercial Code has settled the conflict in favour of the latter view in the jurisdictions which have adopted it. It provides that the transfer without indorsement vests in the transferee such rights as the transferor had therein. If the transferor who did not indorse was not a holder in due course, then his transferee is subject to all defenses as if the instrument were nonnegotiable, although he himself may satisfy the requirements of Sec. 52, unless he obtains the formers indorsement. However, if at the time of such indorsement, the transferee already knew of the defense or he obtains the indorsement after maturity, such indorsement will not improve his status since his being a holder in due course is determined as of the time of indorsement. An intention by both parties at the time of the transfer to have the paper indorsed is not enough for it is the actual act of indorsement which constitutes the negotiation. Campos, further states, that in the absence of proof of the time of the subsequent indorsement, the presumption of Sec. 45 that every negotiation is prima facie deemed effected before the instrument was overdue, can probably apply.