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Negotiable
Instruments Law
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INSERTION OF A WRONG DATE
Sec. 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.
Effects of insertion of wrong date:
Knowingly inserting the wrong date in an undated
instrument will avoid it as to the party so inserting the
wrong date
It is implied that the instrument is void as to the person who
knowingly inserted the wrong date
Also, under Section 12, it is void for ante-dating an
instrument for fraudulent purposes
To a holder in due course, the instrument is not void,
after the instrument is indorsed to him. The insertion of the
wrong date doesnt avoid the instrument in the hands of a
holder in due course.
Q: What if whats inserted is a wrong date?
S: The holder can go to the person who did that first.
Q: What is the consequence of the insertion of a wrong date?
S: It doesnt affect the subsequent holders(holder in due course).
Q: How do you classify if he has knowledge of the defect?
S: a holder not in due course. So acquires no right.
Q: Who can now raise the defences?
S: Personal defences are granted to prior parties.

Q: What is the character of negotiability?


S: that it allows the transfer of the instrument from one person to
another granting the holder, the right to hold the instrument free
from all defences of prior parties. So the parties granted with the
personal defences are the prior parties.
So, insertion of a wrong date gives personal defences to prior parties
PLUS, as to subsequent holder in due course, such is valid and yet
considered as true date as to him. So dichotomize the kind of holder
(meaning, divide into two: HOLDER IN DUE COURSE AND HOLDER NOT
IN DUE COURSE)
For a holder in due course, it is considered as the true date.
A holder not in due course: Subjects him to personal defences of
prior parties which is defense on the insertion of a wrong date.
Knowing the type of holder is important because it affects their
rights with regards to the defects of the instrument such as the
insertion of a wrong date.
If the instrument has no words of negotiability, under Section 1.
Then the instrument is not negotiable.
Example:
I promise to pay A, or his order Php 10, 000 30 days after date.
Signed M.

** So here, its not dated. So M, negotiated the instrument through


endorsement and delivery (order instrument).
M endorsed to A endorsed to B endorsed to C endorsed to D.
Here, C inserted the wrong date of July 1, 2016 (wrong date) instead of July
14, 2016 as date of issuance.

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Q: What are the remedies or liabilities?
S: D can go to M who is primarily liable to pay.
Q: So what will M do? It will either pay or not. You know that its not
issued on July 1. And now, it has not yet matured.

Sec. 65. Warranty where negotiation by delivery and so forth.


Every person negotiating an instrument by delivery or by a
qualified indorsement warrants:chanroblesvirtuallawlibrary
(a) That the instrument is genuine and in all respects what it
purportstobe;

Personal defense of Insertion of a wrong date


If D is a holder in due course -M has no choice but to pay
since his personal defense is not applicable to D who is a
holder in due course (in the absence of info saying D is not a
holder in due course, he is presumed to be a holder in due
course)

(b)

If D is a mere holder not in due course -M can raise the


personal defense -D cannot go to A or B either since they are
PRIOR PARTIES who can likewise raise the defense of
insertion of a wrong date -D can go to C since he is the one
who perpetrated the fraud and "we do not tolerate fraud in
commercial transactions"

validity of the instrument or render it valueless.

M --> A --> B --> C (inserted wrong date) -->D --> E --> F


F is presumed a holder in due course absent any fact to the contrary
The rights of F being a holder in due course are as follows:
=F can first go to the person primarily liable who is M since he
cannot raise the personal defense of insertion of a wrong date -F can
also go to A and B who likewise cannot raise the personal defense of
insertion of a wrong date -F can go to D and E since they 'warranty'
that the instrument is genuine and in all respects what it purports to
be (sec 65) -F can ultimately go to C being the perpetrator of fraud.

(c)

That

That

he

all

prior

has

parties

good

had

title

capacity

to

to

it;

contract;

(d) That he has no knowledge of any fact which would impair the

But when the negotiation is by delivery only, the warranty extends


in favor of no holder other than the immediate transferee.

The provisions of subdivision (c) of this section do not apply to a


person negotiating public or corporation securities other than bills
and notes.

ATTY AMAGO: Class, first paragraph is a negotiation by delivery. the


second paragraph of second 65 (Refer to the above provision) Your
warranty only extend to the person right after immediate transferee.
Go to Section 66. this refers to Indorsement. The warranty extends
to all subsequent parties of that person. I have to tell you about Sec
56 because it will matter on what are the rights of the current holder
in relation to parties subsequent to the instrument. If you have
parties prior they have defences available to them but what gives
you the right to pursue against parties after the defect, the reason

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Negotiable
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because of their warranties under sec 65 and 66 becomes the basis
of the liabilities among the parties.
So, here F can go to C, D and E who warrants that the instrument is
genuine and in all respects what it purports to be. Why does it
matter? WHATEVER is the date of the instrument it is deemed
genuine, they are then precluded from saying it not genuine because
F is a holder in due course.
F can go to M, A AND B while they are prior parties and they have
defenses available to them the same cannot be raised against a
holder in due course. And F can go to C,D AND E because as
indorsers they warrant that the instrument is genuine and in all
respects what it purports to be.
Q: WHAT IF F IS NOT A HOLDER IN DUE COURSE?
A: F may be considered a holder through a holder in due course by
proving that he acquired the instrument through a holder in due
course. Absence of any information, E is a holder in due course. As
such, F can go to to M, A AND B while they are prior parties and they
have personal defences of an insertion of a wrong date cannot raise
it as a defense and F can go to C,D AND E because as indorsers they
warrant that the instrument is genuine and in all respects what it
purports to be.
Q: ULTIMATELY WHERE CAN F GO?
A: F can go to C not M because C is the one who perpetrate the fraud
and we do not tolerate fraud in commercial transactions.
Q: What if it is a bearer instrument?
A: F can go to M the person primarily liable?
Q: Can he successfully get payment from M?

A: Yes because F is a holder through a holder in due course.


Q: So what should be the steps in your analysis?
1. Determine the defect/infirmity in the instrument. (by
knowing this you will know what type of a defense is
involved)
2. Know the current status of the holder.
3. Determine the rights of that particular holder.
In this example, we know that the defect is the insertion of a wrong
date. The defense is a personal defense of insertion of a wrong date.
Q: So when F goes to M?
A: When F goes to M, M cannot raise the personal defense of
insertion of a wrong date because F is a holder through a holder in
due course.
Q: So if M will not pay, what can F do?
A: F can go to E because the warranty in a bearer instrument extends
only to the immediate transferee. It was E who negotiated to F, not
A, B, C, and D. It was E who received money from F by negotiating
the instrument. Thus he is the one who warrants the instrument to F.
So this will be the difference between a bearer and an order
instrument. Because in bearer instruments, you can only go to the
person immediately before you in addition to the person primarily
liable. Ang primarily liable will always be liable. He will be the first
person you will go to, kay siya biyay nihimo sa instrument or siya and
ni-accept sa instrument in case bill of exchange ang gihimo.
Q: But ULTIMATELY, F can go to C. Why is that?

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Negotiable
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A: Because C was the one responsible perpetrating the fraud and we
do not tolerate fraud in commercial transactions. Thats a ground for
damages, its a ground for a criminal case.

To: L

A: He can prove that E is a holder in due course and in effect, B could


be a holder thru a holder in due course. He can now go to L, who
cannot raise a personal defense of insertion of a wrong date against
him. Thereafter, he may go to F, M, X, (prior parties) because they
too cannot raise a personal defense against B and also, because they
are indorsers, the instrument being an order instrument, just like Y
and E. They warrant that the instrument is genuine and in all
respects what it purports to be. Ultimately, he can go to Y because
he perpetrated the fraud and we do not tolerate fraud in commercial
transactions.

Pay to M or order 10,000 30 days after sight.

Q: If this is a bearer instrument?

Q: Class, all this applies if its a promissory note. Now what if its a
BILL OF EXCHANGE?

Example:

Sgd. F
Example:
F -> M -> X -> Y -> E -> B

To: L
Pay to M or order P10,000 40 days after sight,
(Sgd. F)
F -> M -> X -> Y -> E -> D

L (actual acceptance: July 15, 2016)

L (accepted on July 15, 2016)


Y inserted July, 1, 2016

But Y placed instead July 1, 2016


**di ko sure sa letters kay di kayo madungog

Q: What are the rights against prior parties?


Q: Where will the holder go first?
A: He will go to L, the drawee, the person primarily liable because he
accepted the instrument.
**di jud madungog, sorry
Q: What if B is not a holder in due course?

ATTY AMAGO: D can go after:


L = D, while not a holder in due course, can become a holder
through a holder in due course by proving that he acquired
title from E who is a holder in due course. If he is a holder
through a holder in due course, he may go after L being the
person primarily liable, who cannot raise the personal
defense of an insertion of a wrong date against him.
M and X = They cannot raise the personal defense of insertion
of a wrong date against D, being a holder through a holder in
due course.
o Also because they are actually indorsers who warrant
that the instrument is genuine and in all respects

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Negotiable
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what it purports to be. Just like Y and E; they are also
indorsers. Why are they indorsers? Because when F
negotiated the instrument to M, he has to indorse &
sign it; and M would have to sign when he indorses
the instrument to X; the same to Y and E. But then
again, they are prior parties who supposedly can raise
personal defenses against a current holder, but the
same does not matter because D is a holder through
a holder in due course.
Y and E = They indorsed the instrument and warrant that the
instrument is genuine and in all respects what it purports to
be.
Y = He is ultimately liable because he perpetrated the fraud
and we do not tolerate fraud in commercial transactions.
Q: Now if this is a bearer instrument?
A: Since E is presumed to be a holder in due course, D is considered
as a holder through a holder in due course. He can go to:
L = He cannot be subjected to personal defense of insertion
of wrong date of prior parties.
E = Sec. 65 provides that if the instrument is negotiated by
delivery only, the warranty only extends to the immediate
transferee. Based on this provision, D can go to E, who is the
only person who warrants that the instrument is genuine
and in all respects what it purports to be.
ATTY AMAGO: You have to specify in the exam what type of
personal defense is it. I will not accept if you only say personal
defense. Thats why the first analysis you do is determine what
type of infirmity is in the instrument so you will know what the
personal defense is.

ATTY AMAGO: D is merely a holder not in due course. Consequently,


he can be subjected to defenses of prior parties.
D cannot go to L and hold him primarily liable because L can
raise the personal defense of an insertion of a wrong date
against D.
D may go to E because as indorser, E warrants that the
instrument is genuine and in all respects what it purports to
be.
D cannot go to F, M, and X because they did not warrant that
the instrument is genuine and in all respects what it purports
to be (in relation to the insertion of a wrong date). While
they warrant as indorsers or as persons who negotiated by
delivery, it did not include the wrong date yet kay wala pa
man to at the time they indorsed or delivered the
instrument.
D may ultimately go to Y who committed the fraud and we
do not tolerate fraud in commercial transactions.
Q: What if the instrument is not complete, but it is delivered? What is
the consequence? (Sec. 14)
ATTY AMAGO: There are two instances contemplated by Sec. 14: (1)
one where the instrument has a missing material particular so the
person who holds it has the right to complete the instrument by
adding the material particular (he is said to have prima facie
authority to do that); and (2) when the instrument is blank and it
only contains the signature of the person who intends it to be a
negotiable instrument.
Q: What can be filled up in the second instance?
A: Only the amount.

Q: What if E is not a holder in due course?

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Negotiable
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ATTY AMAGO: Sa 1st instance, you can fill up whatever is the
material particular missing. But on the 2nd instance, you can only fill
it up with the amount.
o Because there is an intention to issue a negotiable
instrument, then it is deemed that the contract will just be
created and all the person has to do is insert the amount. All
the other circumstances will have to be filled up in
accordance with the situation that actually happened. What
do I mean by that? If there is a blank instrument and it
contains the signature of the person who intends it to be a
negotiable instrument, when I negotiated it to you (there
has to be delivery in this case), all that has to be done there
is the wordings of the negotiable instrument has to be filled
up, but in relation to the situation that actually happened. So
it would have to state whoever is the person to whom this
was delivered, thats all that has to be added there. There is
no other authority provided.
o

Unlike in the 1st instance which is missing in material


particular, whatever is the blank, you fill up. In the 2nd case,
its as if all the other missing items, you cannot fill up. It
would be filled up by that actual situation that happened.
But what can be added is just the amount.

Its difficult to imagine because if you come to think of it if


Im given a blank paper, it does not mean I will fill it up gyud
as part of my authority. But then again, the contemplation
under Sec. 14 is that only the amount may be inserted.

So how will it be filled up then? It will be filled up by


whatever is the actual circumstance. Your authority there is
that you will just have to add there the actual event that
transpired. Since there is an intention to fill up a negotiable
instrument, so it must be I promise to pay ____. Kinsa man

gi-pay? The payee will be you who received the instrument.


Its really difficult to imagine because blank lang gud ang
paper, and yet the only authority given is the authority to fill
up the blank, which is the amount ra ba jud, not all other
circumstances.
o

How can it be just signature and ni-appear on a blank paper?


Kinsa may mo-fill up ato dapat sa mga other circumstance?
Well supposedly the holder. But what can be filled up there,
it should be what has actually transpired. So that if
something is changed, it will then be considered as material
alteration and Sec. 124 will apply, not Sec. 14.

So as of now, whenever theres a situation calling for a blank


instrument which contains only a signature, the authority is
just to fill up the amount. All the rest cannot be filled up. If
ever it is filled up and it is not in relation to the actual
scenario or to the actual event which transpired, then it will
be considered as material alteration wherein Sec. 124
applies.

Blank ra man gud ang giingon. There is also another theory


which you can actually devise in relation to Sec. 14 that
everything must already have been printed and need not be
written. All that can be written there is the signature and the
amount. That seems to be more logical. But if you follow
what is written in Sec. 14 - murag blank paper, unsaon
pagka-blangko kung naay printout? Diba dili na na sya blank
paper? But that must have been also the contemplation.
Because otherwise kinsa lagi ang mosuwat? Ikaw lang
gihapon ang mosuwat sa all the other missing elements? So
the situation must have been naay instrument nga already
printed out, murag pro forma instrument and all that has to
be written nalang is the amount and it already bears the

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signature of whoever made the instrument. So it is blank in


the sense that there is no amount provided.

A: All that has to be done is to fill up the amount on this second


situation. In the first situation, it is everything that is missing.

Mas samot kag ka-confuse sa example na what if there is a


piece of paper given to a celebrity who signs it as an
autograph. And then someone made an instrument out of it.
What will then apply?

Q: Whats then the consequence if ever there is an insertion which is


not in accordance with the authority provided?
1st situation: The authority is to fill it up whatever is the
missing material particular.
2nd situation: To fill up the amount.

Q: What will then apply in that case?


A: Material alteration.

Q: Is there a negotiable instrument?


A: No, thus the NIL in that case will not apply. What Im saying is that,
it is the example given. The intention must have been blank jud diay
ni nga paper iyang gihuna-huna nga wala at all sulat kay ang iyang
example is an autograph. Nya ang autograph naa ba diay nay sulat
nga wala man, papel ra mana papirmahan. So the situation or the
contemplation must have been blank ning papel pero naay signature
and then you know that the intention is to make a negotiable
instrument.
So that it will not be very confusing and so that you can picture it
out, what you surmise or what you just think is there is this piece of
paper which has already the printed out wordings of a negotiable
instrument and the only remaining blank there is the amount and it
contains the signature of the maker or whoever is the drawer of the
instrument. So that you would know that the authority relates only
to the inserting of the amount on the instrument.

Q: What if in the 1st situation, the authority is to insert the interest.


The interest happens to be 5%. Instead of 5% what was placed was
20%. How will it affect the instrument or how will it affect the rights
of a holder?
I promise to pay X or order P1m with interest 20%.
Sgd. M
M --> X --> A --> B --> C --> D --> E
(20%)
Q: From M, the instrument is negotiated to X, then negotiated to A,
negotiated to B who placed the interest of 20%. Then negotiated it
to C, then to D, then to E. E is the current holder of the instrument.
Discuss the rights of E. Take note: The instrument is an incomplete
but delivered instrument. This defense is a personal defense of an
incomplete but delivered instrument.
It is a personal defense according to Sec. 14 which provides
that:
Where the instrument is wanting in any material
particular, the person in possession thereof has a

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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.
Any instrument which is incomplete but already completed
(whatever the completion made, true or not) and that
instrument is already in the hands of a holder in due course,
it is as if the instrument was filled up strictly in accordance
with the authority given. This means that, there could be no
defense of an incomplete but undelivered instrument
available to a holder in due course because in his hands, it is
always completed strictly in accordance with the authority
given. In fact, it is considered valid and effectual for all
purposes. It is as if the instrument was never incomplete in
the first place if you are a holder in due course. This only
happens if the instrument was completed after it has passed
from the maker or the drawer which at the time was initially
an incomplete instrument.
If it falls upon the hands of the holder in due course and the
instrument is incomplete, there is no way of knowing that

the instrument is completed strictly in accordance with the


authority given when it is not complete in your hands.
So again, this will only happen when the instrument in your
hands is already completed and defense of an incomplete
but delivered instrument will not be available against you
because in your hands, the instrument is completed strictly
in accordance with the authority given and it is valid and
effectual for all purposes in your hands.

To answer the question above, first is to determine what


kind of a defense is imposed in the instrument which in this
case is a personal defense as discussed above. Second, we
determine the kind of holder.
In this case, E is presumed to be holder in due course in the
absence of any other information. Because he is a holder in
due course, he can go to M and successfully demand
payment because M cannot raise the personal defense of an
incomplete but delivered instrument. E can also go to X and
A because while they are prior parties and have a personal
defense of an incomplete but delivered instrument, the
same cannot be raised against E who is a holder in due
course. E can also successfully demand payment from B, C
and D because they are indorsers who warrant that the
instrument is genuine and in all respects what it purports to
be. Ultimately, E can go to B who is the perpetrator of the
fraud because the law does not tolerate fraud in commercial
transactions.
Q: What if E is not a holder in due course, will it change your answer?

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No, it will not change the answer because E can be
considered a holder through a holder in due course as he
acquired title from D who is presumed to be a holder in due
course. That being the case, E can go after M, X and A
because they cannot raise the personal defense of an
incomplete but delivered instrument to E who is a holder
through a holder in due course. E can also demand payment
from B, C and D because as indorsers they warrant that the
instrument is genuine and in all respects what it purports to
be. Ultimately, E can go to B who perpetrated of the fraud
because the law does not tolerate fraud in commercial
transactions.
Q: If E is not a holder in due course and D is also not a holder in due
course, will that change your answer?
Yes. E cannot successfully demand payment from M because
M can now raise the personal defense of an incomplete but
delivered instrument considering that E is not a holder in
due course and same goes to X and A. However, E can
successfully demand payment from B, C and D because as
indorsers they warrant that the instrument is genuine and in
all respects what it purports to be. Ultimately, E successfully
demand payment from B who perpetrated of the fraud
because the law does not tolerate fraud in commercial
transactions.
Question: DILI MAKLARO AND QUESTION NI RED SAMOT KAY SI
PHOENIX NITINGOG. HAHAHAHAHA!!!
(You dont have to follow exactly what I have said. You can express it
on your own words. But please dont make to long that I am reading
a novel already. Be brief and consice on your answers! )
Remedy of a holder in due course: Ultimately you can go the one who
perpetrated the fraud. You can also go to prior parties who cannot

raise personal defenses. What is good thing about negotiable


instrument class is that it gives rise to accumulation of secondary
contracts. You can go to any of them. You can go to the person
primarily liable and demand payment, and then if di siya mu.pay,
then you can to the secondary person liable, and so on. Thats the
beauty of negotiable instrument!
Q: What if it is incomplete but undelivered instrument?
-

Its just like any piece of paper, supposed to be no source of


any liability at all. Not complete for probably there is amount
stated but it is already signed by the maker/drawer. What
happens here, someone stole it. It got negotiated, it got
delivered to someone else. Now it is on the hands of the
current holder. What is the effect of that incomplete and
undelivered instrument?
Sec. 15. Incomplete instrument not delivered. Where anincomplete 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 si
gnature was placed thereon before delivery.
Q: so it is not a valid instrument in the hands of any holder.
So what kind of defense is this?
A: it is a real defense. So even if it completed or it has been
delivered, it is NOT VALID in the hands of ANY HOLDER. But
only with regard to parties prior to the completion and prior
to the delivery. Because after that, they will become
indorsers who warrants that the instrument is genuine and
in all respects what it purports to be PLUS that they have

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good title to it. It matters now that they have good title to it
kay delivery naman ang issue. So duha na ang imu
memorizon class in section 15. That: 1) the instrument is
genuine and in all respects what it purports to be PLUS 2)
that they have good title to it.
ATTY AMAGO: So lets have a situtation, this is the most
common class. Here is a boss who wrote I promise to pay
______ or order Php 1 million Sgd. M put it in his cabinet
and store it there. He did not know that his secretary stole
the instrument, place his name on the instrument and
delivered. Lets name the secretary as X. So M is the one
who make the instrument what it is incomplete as to payee.
P stole it and after completing it, negotiated it to A, to B, to
C, and then to D. What are the rights of D? Does it matter if
D is a holder in due course?
A: The answer si NO. it wont matter if D is a holder in due
course because again this is a REAL DEFENSE. M can raise
the real defense that the instrument being incomplete and
undelivered.
Q: But D can after to P, A, B, and C. Why?
A: Because they are all indorsers and they warrant that the
instrument is genuine and in all respects what it purports to
be PLUS that they have good title to it.
Q: So far what defense have we discussed?
1. Insertion of wrong date - PERSONAL
2. Incomplete but delivered instrument - PERSONAL
3. Incomplete and undelivered REAL

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