NEGOTIABLE INSTRUMENTS LAW

SCHOOL YEAR 2018-2019, 2nd SEMESTER

MANUEL L. QUEZON UNIVERSITY SCHOOL OF LAW

ATTY. ROLANDO G. BORJA

The course covers the study of Negotiable Instrument Act 2301.

COURSE OBJECTIVES

At the end of the semester the students are expected to gain an in-depth
knowledge and understanding of the provisions of the Negotiable Instruments
Law, its nature, kinds and negotiability and negotiations negotiable
instruments.

TOPICS

NEGOTIABLE INSTRUMENTS LAW

I. Introduction
1. Definition
2. Characteristics -negotiability and accumulation of secondary
contract.
3. Negotiable vs non-negotiable instruments; Case: Sesbreno v. Court of
Appeals, G.R. No. 89252, May 24, 1993.
4. Some Non-Negotiable Instruments
5, Functions - . substitutes for money, increases purchasing power
in circulation, increases credit circulation, medium of exchange and evidence
of transaction. Case: Ting ting Pua vs Sps Benito Lo Bun Tiong, G.R. No. 198660, October
23, 2013.
6. Negotiable instrument not legal tender. (Sec. 52 of the Republic
Act No. 7653; BSP Circular No. 537, Series of 2006; Sec. 60 of the
Republic Act No. 7653); Case: BPI vs Sps. Royeca, G.R. No. 176664, July 21, 2008,
Roman Catholic Bishop of Malolos vs. IAC, GR No. 72110, Nov 16, 1990.
7. Incidents in the life of Negotiable Instruments
8. Kinds of negotiable instruments
a. Promissory Note- parties and kinds
b. Bill of Exchange – parties and kinds
9.
10. Distinction between Bill of Exchange and Promissory Notes
11. When Bill is treated as Notes

II. Forms and Interpretations of Negotiable Instruments.

1. Negotiability how determined.
 Case: Caltex (Philippines) vs. CA G. R. No. 97753, August 10, 1992.

2. Requisites for negotiability (Section 1, NIL).

Cases:; Salas vs CA, G.R. No. 76788, January 22, 1990; Firestone Tire vs CA,
GR No. 113236, March 5, 2001

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.

(1) promise or order to pay must be unconditional; when

promise is unconditional (Sec. 3): (a) reference to transaction;
(b)source or payment or account to be debited

(2) payable in sum certain in money; what constitutes

certainty as to sum. (Sec 2): (a) provisions which do
not affect certainty of sum payable; (ii) payment of interest; (iii)
payment by instalments; (iv) acceleration clause; (v) payment with
exchange; (vi) payment of attorney’s fees.

Cases: Metropolitan Bank vs CA, G.R. No. 8886618; February 1991; Caltex vs
CA, G.R. No. 97753 Supra.)

c. Must be payable on demand, or at a fixed or determinable

future time.

(1) When payable on demand (Sec. 7);

(2) What constitutes determinable future time. (Sec. 4););

d. Must be payable to order or to bearer; when payable to order

Sec. 8); when payable to bearer (Sec. 9); fictitious payee rule,
exceptions, burden of proof.

Cases: Consolidated Plywood Industries, Inc. v. IFC Leasing and Acceptance

Corporation, G.R. No. L-72593, April 30, 1987; PNB vs Rodriguez and Rodriguez,
G.R. No. 170325 September 26, 2008.

e. Where the instrument is addressed to a drawee, he must be

named or otherwise indicated therein with reasonable certainty
(identification of the drawee); two or more drawee; option to treat as
PN; drawer is at the same time the drawee.

3. Omissions that do not affect negotiability (Sec. 6), insertion of date

(Sec. 13); Additional Provisions that Do Not Affect Negotiability (Sec. 6)
 4. Terms, when sufficient (Sec. 10.)

5. Presumption as to date. (Sec. 11)

6. Ante-dated and post-dated (Sec. 12).

Case: San Miguel Corp. vs Puzon, Jr., G.R. No. 167567, September 22, 2010.

7. Interpretation of Instruments. (Sec. 17)

Cases:
Republic Planters Bank vs. CA, 216 SCRA 738; Sps.Evangelista vs. Mercator
Finance Corp., et. al, August 21, 2003; Ilano vs. Hon. Espanol, G.R. No. 161756,
16 December 2005

III. ISSUE, TRANSFER AND NEGOTIATION OF NEGOTIABLE

INSTRUMENTS

1. Issuance/Delivery of Negotiable Instruments; Meaning

a. Issue (Sec. 191)
b. Incomplete instrument not delivered.( Sec. 15)
c. Blanks, when may be filled. (Sec. 14)
d. Delivery; when effectual; when presumed. (Sec. 16)

Cases: Patrimonio vs. Gutuirrez, G.R. No. 187769, June 4, 2014; De La

Victoria vs. Judge Burgos, G.R. No. 111190. June 27, 1995; Development Bank of Rizal
vs. Sima Wei, G.R. No. 85419 March 9, 1993; Lim v. Court of Appeals, [G.R. No.
107898. December 19, 1995; RCBC vs. Hi-Tri Dev. Corp. , et. al, G.R. No. 192413, June
13, 2012
.
2. Modes of Transfer
a. Non-negotiable instrument-assignment.
b. Negotiable instrument – negotiation;
c. Other modes of transfer
d. Distinction between negotiation and assignment.
Cases: Casabuena v. Court of Appeals, G.R. No. 115410. February 27, 1988; Sesbreno
vs. Court of Appeals, G.R. No. 89252. May 24, 1993.

3. Negotiation; meaning; what constitutes negotiation; Ways of

negotiation (in case of order or bearer instruments). (Sec 30 and Sec. 16))
MPIC44444444ttp://
4. Indorsement
a. Concept
b. How made (Sec. 31 & 32)
 c.. Kinds of Indorsement (Sec. 33): (1) special and blank
(Sec. 34 & 35), (2) conditional (Sec. 39), (3) qualified (Sec. 38, (4)
restrictive (Sec. 36 & 37)

d. Other rules on indorsement: (1) indorsement of an

instrument payable to bearer (Sec. 40); (2) where instrument is payable
to two or more persons (Sec. 41); (3) instrument is drawn or indorsed to
a person as cashier (Sec. 42); (4) where name of payee or indorsee is
misspelled (Sec. 43); (5) indorsement in a representative capacity (Sec.
44); (6) presumption as to time of indorsement (Sec. 45); (7) place
of indorsement (Sec. 46); continuation of negotiable character (Sec. 470);
(8) striking out of indorsement (Sec. 48); (9) transfer of an order
instrument without indorsement (Sec.49).

f. Negotiation by a prior party (Sec. 50, NIL)

e. When a person deemed indorser (Sec. 63).

rjhez
Page 9 Cases: People of the Phils. v. Gilbert Reyes Wagas, G.R. No.
157943, September 4, 2013; Metropol (Bacolod) Financing vs. Sambok Motors Co., et al., G.R.
No. L-39641. February 28, 1983; Gempesaw vs. CA, G.R. No. 92244 February 9, 1993;
Montinola v. PNB, G.R. No. L-2861. February 26, 1951; Metropol (Bacolod) Financing and
Investment, Corp v. Sambok Motors Company, G.R. No. L-39641. February 28, 1983.

IV. CONSIDERATION FOR ISSUANCE AND SUBSEQUENT

TRANSFER

1. Presumption of consideration. (Sec. 24)

2. What Constitutes Value (Sec. 25)

3. What constitutes holder for value. (Sec. 26)

4. When lien on instrument constitutes holder for value. (Sec. 27)

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

Cases: Ting Ting Pua vs. Sps. Benito Lo Bun Tiong and Caroline Siok Ching
Teng, G.R. No. 198660, October 23, 2013; Banas Jr. v. Court of Appeals, [G.R. No.
102967. February 10, 2000;

V. HOLDERS

1. General concept of a holder; classes of Holders: a. simple holder; b.

holder for value
 2. Holder in due course (requisites) (Sec. 52)
a. instrument complete and regular
b. taken before overdue - (1) rule in case of
installment instruments; (2) rule in case of demand instruments
(Sec. 53)
c. notice of infirmity or defect (Sec. 56 & 57) (See also Sec. 54)
d. good faith
e. holder for value

3. Rights of holders in due course (Sec. 57); (see also Secs. 14 and 16)

4. Shelter Rule (Sec. 58)

5. Presumption of due course holding (Sec. 59)

Cases: Yang vs. CA, G.R.No. 138074, August 15, 2003; Mesina vs. IAC, G.R. No.
70145, November 13, 1986; Atrium Management v. Court of Appeals, G.R. No. 109491,
February 28, 2001; Yang vs. Court of Appeals, G.R. No. 138074. August 15, 2003; Bataan Cigar
and Cigarette Factory, Inc. vs Court of Appeals, G.R. No. 93048. March 3, 1994; Stelco
Marketing Corporation v. Court of Appeals, G.R. No. 96160. June 17, 1992; Alvin Patrimonio v.
Napoleon Gutierrez , et. al. G.R. No. 187769 June 04, 2014

VI. LIABILITY OF PARTIES.

1. Primary and secondary liability distinguished

2. Liability distinguished from warranties

3. Liability and/or warranties of parties

a. Maker (Sec. 60)
b. Drawer (Sec. 61); (1) relationship with drawee, (2)
relationship with collecting bank
c. Acceptor (Secs. 127 and 62)
d. Indorsers: (1) General indorsers (Sec. 66); (2)
Qualified indorser (Sec. 65); (3) Order of liability (Sec. 68)
e. Parties negotiating by mere delivery (Sec. 65)
f. Other cases: (1) irregular indorser (Sec. 64), (2) indorser of
bearer instrument (Sec. 67), (3) accommodation party (Sec. 29), (4)
agents signing in behalf of the principal (Sec. 20).
Cases: PNB vs. Picornell, et al, 46 Phil 716; Astro Electronics vs. Roxas, et al.,
September 23, 2003; Garcia vs. Dionisio, December 8, 2003; Crisologo Jose vs. CA,
Sept. 15, 1989; Sadaya vs. Sevilla, 19 SCRA 924; Travel –On vs. CA, 210 SCRA 352; Agro-
Conglomerates Inc. vs. CA, 348 SCRA 350; Far Eastvs. Gold Palace Jewelry, G.R. No. 168274,
August 20, 2008.|