bills and notes1

BILLS AND NOTES

CHAPTER I: CONCEPTS

A. Act No. 2031 (Negotiable Instruments Law)

B. Civil Code and Negotiable Instruments

1. Negotiable Instruments and Words of Negotiability

Section 1, NIL

Violago v. BA Finance Corp., 559 SCRA 69

Consolidated Plywood Industries, Inc. v. IFC Leasing, 149 SCRA 448

2. Non-negotiable Instruments and Negotiable Documents

Drafts and Letters of Credit (Prudential Bank v. IAC, 216 SCRA 257;

Bank of America v. CA, 228 SCRA 357)

Certificate of Deposit (International Exchange Bank v. CIR, 520

SCRA 688)

Document of Title i.e. bill of lading, dock warrants, quedans or

warehouse receipts, (Articles 1636 and 1507, Civil Code;

Gonzales vs. Go Tion, 104 Phil. 492; Saludo v. CA, 207 SCRA

498)

Certificates of Stocks (Capco v. Macasaet, 189 SCRA 561)

Treasury Warrants, Bonds and Debentures (Metropolitan Bank &

Trust Co. v. CA, 194 SCRA 169)

3. Non-negotiability: Estoppel Exception

Banco De Oro v. Equitable Bank, 157 SCRA 188

4. Application of the NIL

Section 196, NIL

5. Legal Tender; Payment

Article 1249, Civil Code

Section 52, R.A. No. 7653

1

Villanueva v. Santos, 67 Phil. 648

Citibank NA v. Sabeniano, 504 SCRA 37

C. Kinds of Negotiable Instruments

1. Promissory Note

Section 184, NIL

Jimenez v. Bucoy, 103 Phil. 40

2. Bill of Exchange

Section 126, NIL

3. Check

Section 185, NIL

Phil. Bank of Commerce v. Aruego, 102 SCRA 530

2

CHAPTER II: PARTIES

A. Parties (Sections 191 in relation to Sections 126 and 184, NIL)

Holder

Maker/Drawer

Payee

Drawee/Acceptor

Bearer

Indorser

Indorsee

Villanueva v. Nite, 496 SCRA 459

Hi-Cement Corp. v. Insular Bank of Asia, 534 SCRA 269

B. Requisites of Contract and Capacity to Contract

Articles 1318 and 1327, Civil Code

Article 1381, Civil Code (Rescissible Contracts)

Article 1390, Civil Code (Voidable Contracts)

Article 1403, Civil Code (Unenforceable Contracts)

Article 1409, Civil Code (Void Contracts)

C. Exceptions with Respect to Negotiable Instruments

Incapacity (Section 22, NIL)

Illegality (Sections 38 and 39, NIL)

Forgery (Sections 18 and 23, NIL)

Duress (Section 55, NIL; Article 1335, Civil Code)

D. Liabilities (Section 192, NIL)

Primarily Liable (Maker and Acceptor)

Secondarily Liable (Drawer and Indorser)

E. Indorser vs. Guarantor/Surety

Allied Banking Corp. v. Court of Appeals, 494 SCRA 467

3

CHAPTER III:FORMS AND INTERPRETATIONS

FORMS

A. Written and Duly Signed

Section 18 and 19, NIL

B. Unconditional Order or Promise to Pay

Section 3, NIL

Powell v. Greenleaf

Villanueva v. Nite, 496 SCRA 459

C. Certain Sum Payable

Section 2, NIL

Republic Resources Dev’t Corp. v. CA, 203 SCRA 164

Abubakar v. Auditor General, 81 Phil. 360

D. Payable to Order or to Bearer

Section 8, NIL

Section 9, 184, NIL

Consolidated Plywood Industries vs. IFC Leasing, 149 SCRA 448

Ang Tek Lian v. CA, 87 Phil. 383

PNB v. Rodriguez, 566 SCRA 513

E. Certain Designation of Parties

Sections 8, 128 and 130 NIL

BPI v. CA, 512 SCRA 620

F. Certain Times of Payment; Demand

Sections 4, 11, 17, NIL

Ponce de Leon v. Rehabilitation Finance, 36 SCRA 289

Buencamino v. Hernandez, 8 SCRA 483

INTERPRETATION AND CONSTRUCTION

G. Provisions not affecting negotiability

Section 5, NIL

4

Acenas v. Sison, 8 SCRA 711

H. Omissions

Section 6, NIL

I. Dates of Instrument

Sections 11, 12 and 13, NIL

Pacheco v. CA, 319 SCRA 595

People vs. Tiongco, 290 SCRA 595

J. Blanks; When Filled

Section 14, NIL

Borromeo v. Sun, 317 SCRA 176

K. Incomplete Instruments

Section 15, NIL

Development Bank of Rizal v. Wei, 219 SCRA 736

L. Construction

Section 17, NIL

5

CHAPTER IV: CONSIDERATION AND EFFECTS

A. Presumption

Section 24, NIL

Travel-On Inc. v. CA, 210 SCRA 351

Idos v. CA, 296 SCRA 194

B. Value

Section 25, NIL

Rodriguez v. CA, 207 SCRA

Pineda vs. dela Rama, 121 SCRA 671

C. Holder for Value

Section 26, NIL

Bataan Cigar v. CA, 230 SCRA 643

D. Lien Holder; Holder for value

Section 27, NIL

Caltex (Phils.) v. CA, 212 SCRA 448

E. Effect of Want of Consideration

Section 28, NIL

F. Accommodation Party

Section 29, NIL

Jose v. CA, 177 SCRA 594

Ang v. Associated Bank, 532 SCRA 244

6

CHAPTER V: TRANSFER AND NEGOTIATION

A. Issuance and Delivery

Section 16, 191 NIL

In Re: Marten's Estate

De la Victoria v. Burgos, 245 SCRA 374

Lim v. CA, 251 SCRa 408

B. Negotiation; Holder

Sections 30, 191, NIL

State Investment House v. CA, 217 SCRA 32

Bank of Philippine Islands v. Court of Appeals, 512 SCRA 620

C. Methods of negotiation

Allied Banking Corp. v. CA, 494 SCRA 467

D. Indorsement

- By signature on instrument or on allonge

Sec. 31, NIL

- In case of joint or alternative payees or indorsers

- Where name is misspelled

E. Indorsement must be entire instrument

Severally:

Jointly and severally

Sec. 32, NIL

Montinola v. PNB, 88 Phil. 178

F. Kinds of Indorsements

Special & blank indorsements; payable to bearer, qualified and restrictive


G. Qualified Indorsement

7

Metropol Bacolod Financing & Investment Corp. v. Sarmak, 120 SCRA

864

Great Asian Sales Center Corp. v. CA, 381 SCRA 557

H. Conditional Indorsement

Section 39, NIL

I. Indorsement to or by collecting bank

Metropolitan Bank & Trust Co. v. Phil. Bank of Communications, 536

SCRA 556

J. Unindorsed instruments

Section 49, NIL

K. Cancellation of indorsements

Section 48, NIL

L. Indorsement by agent

Section 44, 20 NIL

Francisco v. CA, 319 SCRA 054

M. Presumption as to indorsements

Sections 45 (time), 46 (place) , 42 (payee)

N. Continuation of negotiable character

Section 47, NIL

8

CHAPTER VI: HOLDER IN DUE COURSE

A. Holder; Holder for Value and Holder and in due Course

Sections 26, 52, 53 and 191 NIL

Prudencio v. CA, 143 SCRA 11

BPI v. Roxas, 536 SCRA 168

B. Holder For value

Sections 24, 25, 26 and 27, NIL

Caltex (Phils.) v. CA, 212 SCRA 448

C. In Good Faith

Sections 55, 56 NIL

Article 1338, 1344 Civil Code

Gonzales v. RCBC, 508 SCRA 459

a. Crossing a check; bad faith

Hi-Cement Corp. v. Insular Bank of Asia, 534 SCRA 269

Metropolitan Bank & Trust Co.v. Philippine Bank of communications,

536 SCRA 556

b. Financing company; holder in good faith

Salas vs. CA, 181 SCRA 296

Great Asian Sales Center Corp. v. CA, 381 SCRA 557

Section 146, RA No. 7394 (Consumer Act of the Phils.)

c. Postdating a check

Section 12, NIL


d. Suspicious circumstances

Vicente de Ocampo & Co. v. Gatchalian, 3 SCRA 596

e. Effect of purchase at a discount

9

f. Effect of notice before full payment

Section 54, NIL

g. Constructive notice not sufficient

h. Notice of accommodation not notice of defect

Section 29

D. Complete & Regular; material alteration

Section 124, 125, NIL

International Corporate Bank v. CA, 501 SCRA 20

E. Holder at or after maturity & without notice of dishonor

Section 53, NIL

F. Rights of a Holder in Due Course


a. Personal defenses

b. Real defenses


Yang v. CA, 409 SCRA 159

G. Effect of qualified conditional and restrictive indorsements

H. Payee as holder in due course

Howard National Bank v. Wilson

I. Rights of a purchaser from a holder in due course

Section 58, NIL

Gonzales v. Rizal Commercial Banking Corp., 508 SCRA 459

J. Presumption in favor of due course holding

Section 59, NIL

10

BPI v. CA, 232 SCRA 302

K. Transfer of unindorsed instrument

Section 49, NIL

Commercial Bank of Lafayette & Trust Co. vs. Barry

11

CHAPTER VII: DEFENSES AND EQUITIES

A. Defenses and Equities in general

Section 57, 58, 55, NIL

B. Incapacity

Section 22, NIL

Murray vs. Thompson

Section 45, Corporation Code

C. Illegality

Articles 38, 39 (i); Civil Code

Rodriguez vs. Martinez

Pineda v. de la Rama, 121 SCRA 671

D. Forgery


Associated Bank v. CA, 252 SCRA 620

Republic v. Edrada, 65 SCRA 680

E. Acceptance and payment under mistake

Effects of Acceptance

Far East Bank & Trust Co. v. Gold Palace Jewellery, 562 SCRA

604

When drawee accepts and pays for forged instrument

Section 62, NIL

Price vs. Neal

PNB vs. CA, 25 SCRA 693

Extensions of Price vs. Neal doctrine

- Over draft

First National Bank of Portland vs. Noble

Liberty Trust vs. Haggerly

- Stop payment order

Effect of negligence of depositor

12

PNB v. Quimpo, 158 SCRA 582

Gempesaw v. CA, 218 SCRA 682

Effect of payment under forged indorsements

Manila Lighter Trans. v. CA, 182 SCRA 251

Samsung Construction v. Far East Bank, 436 SCRA 402

Effect of negligence of drawee in informing recipient of forgery

Clearfield Trust Co. v. US

Estoppel

MWSS v. CA, 143 SCRA 20

F. Material alteration

a. In general


Banco Atlantico v. Auditor General, 81 SCRA 335

Metropolitan Bank & Trust Co. v. Cabilzo, 510 SCRA 259

b. Effect of negligence of drawer of checks

Foutch v. Alexandria Bank & Trust Co.

c. Effect of drawee’s payment of acceptance of altered check

Marine National Bank v. National City Bank

d. Payment under materially altered instrument

Metropolitan Bank & Trust Co. v. Cabilzo, 510 SCRA 259

G.Fraud

C.I.T. Corp. v. City of Taunton

H. Duress

I. Complete instrument which is undelivered

Section 16, NIL

People v. Yabut, 76 SCRA

Lim v. CA, 251 SCRA 408

J. Incomplete instrument which delivered

Section 15, NIL

13

Linick v. A.J. Nutting Co.

K. Incomplete instrument which has been delivered

Section 14, NIL

Borromeo v. Sun, 317 SCRA 176

Pacheco v. CA, 319 SCRA 595

L. Consideration

Section 28, NIL

Dougherty v. Salt

M. Signature under Trade Name or Agency

Sections 18, 19 and 20, NIL

Francisco v. CA, 319 SCRA 354

Philippine Bank of Communicationsv. Aruego, 102 SCRA 530

CHAPTER VIII: LIABILITY OF PARTIES

A. Liability of primary parties

a. In general

Section 192, NIL

Far East Bank & Trust Co. v. Gold Palace Jewelry, 562 SCRA 604

b. Want of demand; presentment

Section 70, NIL

Clark v. Sellner, 42 Phil. 385

c. Status of drawee prior to acceptance or payment; effect of stop

order


Republic v. FNCB, 35 SCRA 851

Phil. Bank of Commerce v. CA, 269 SCRA 695

d. Liability of acceptor

Section 62, NIL

Far East Bank & Trust Co. v. Gold Palace Jewellery, 562 SCRA 604

14

B. Formal requisites of acceptance

Section 191, 132, 133, 138, NIL

Constructive acceptance

Sections 136, 137, 150

Wisner vs. First National Bank of Gallitzin

C. Acceptance on a separate instrument

Sections 134, 135

Coolidge vs. Payson

D. Kinds of Acceptance

a. General acceptance


b. Qualified acceptance

Section 141, 142 NIL

c. Trade acceptance

ci. Banker’s acceptance

E. Checks

Sections 185, 63

PAL v. CA, 181 SCRA 557

International Corporate Bank v. Gueco, 351 SCRA 516

a. Certification and its effects

Sections 187, 188 and 189

Roman Catholic Archbishop of Malolos Inc v. IAC

b. Distinction between surrender of check upon payment and

negotiation

c. Clearing of checks

F. Liability of secondary parties

Section 70

a. Liability of drawer; stop payment

Section 61

15

PNB vs. Picornell, 46 Phil. 716

b. Criminal liability for bouncing checks

a) under B.P. No. 22,

Moster v. People, 546 SCRA 287

b) estafa under the Revised Penal Code

Lazaro v. Martinez, 146 SCRA 323

Dy v. People, 571 SCRA 59

c. Liability of qualified indorsement and one negotiating by delivery

Section 65

d. Liability of a general or unqualified indorser

Sections 66, 67, 63, 40, NIL

Allied Banking Corp. v. Lim Sio Wan, 549 SCRA 504

e. Liability of restrictive indorsers

f. Order of liability among indorsers

Section 68, NIL

G. Liability of accommodation party

Sections 29, 63, 64

Ingalls vs. Marston

Prudencio vs. CA, 143 SCRA 7

PRESENTMENT

J. Presentment for acceptance

a. When necessary effect of non-presentmen


b. How and when made


c. When excused


d. Dishonor and its effects

Sections 149, 150, 151, 89, 117, NIL

K. Presentment of payment

16

a. When presentment necessary; effect of non-presentment


b. When presentment not necessary

a) As to drawer

Section 79, NIL

b) As to indorser

Section 80, NIL

c) As to all secondary parties

Section 82, 151, 111, NIL

c. Date and time of presentment of instrument bearing fixed maturity

Sections 71, 85, 86, 124, NIL

Far East Realty Investment Inc. v. CA, 166 SCRA 256

d. Date of presentment of demand notes

Section 7, NIL

Buencamino v. Hernandez, 85 SCRA 483

e. Date of presentment of demand bills of exchange

Columbian Banking vs. Boween

f. Date of presentment of checks


City of Naga v. Agna, 715 SCRA 176

Wong v. CA, 351 SCRA 100

g. When delay in presentment excused

Section 81, NIL

h. Manner of presentment

Section 74, NIL

i. What constitute sufficient presentment

Section 72, NIL

a. By whom

Crossed checks

b. Time of presentment

Sections 72(b), 75

c. Place of presentment

Section 73, NIL

d. To whom presentment must be made

17

Sections 72(d), 76, 77, 78, NIL

j. What constitutes dishonor by non-payment

Section 83, NIL

k. Effect of dishonor by non-payment

Section 84, NIL

L. Notice of dishonor

a. When necessary

Section 89

b. Form and contents must be given


c. Time within which notice must be given

Sections 102, 103, 104, 105, 106, 107, 113

Arterburn vs. Wakefield

d. Place where notice must be given

Section 108

e. By whom notice may be given

Section 90, 91, NIL

f. To whom notice must be given

a. if given by agent

Section 94, NIL

b. To whom in general

Section 97, NIL

c. if party is dead

Section 98, NIL

d. to partners

Section 99, NIL

e. to joint partners

Section 100, NIL

f. to bankrupt

Section 101, NIL

h. In whose favor notice operates

Section 92, 9.

i. When rule requiring notice not applied

18

a. In general

Section 112

b. when notice of non-acceptance already given

Section 116

c. Waiver

Sections 109, 110

People’s National Bank of Ypsiolanti vs. Dicks

d. When not necessary to charge drawer

Section 114

State Investment House vs. Ca, supra

e. When not necessary to charge indorser

Section 115

b. Legal effect of failure to give notice

Sections 89, 117

PROTEST

M. Protest

a. Definition and method

Velasquez v. Solidbank, Corp., 550 SCRA 119

b. When necessary

Sections 152, 129, 157

c. Forms and contents of certificate of protest

Section 153

a. Purpose of the certificate of protest

b. By whom made

Section 154

f. Time and place of protest

Sections 155, 156

g. Protest for better security

Section 158, NIL

h. When delay is excused and protest


Ellenbogen vs. State Bank

i. Waiver of protest

19

Section 111, NIL

j. Protest in case of loss of instrument

Section 160

N. Acceptance for honor


O. Payment for honor

Section 171, NIL

P. Liability of party on indorsement after maturity

Section 7, NIL

Bishop vs. Dexter

Q. Instruments payable at a bank

Section 87, NIL

Binghampton Pharmacy vs. First National Bank

R. Bills in set

Sections 178, 179, 180, 181, 182, 183, NIL

S. Liability of transferors or assignors or negotiable instruments

Art. 1628 CC

CHAPTER VIII: DISCHARGE

PRIMARILY LIABLE

A. Discharge of the instrument; generally

Section 119, NIL

B. By payment in due course

Sections 51, 88

i. Medium of payment

20

PNB v, CA, 181 SCRA 557

ii. By whom made

Fox vs. Kroeger

iii. When check deemed paid by drawee bank

iv. To whom made

Equitable Banking vs. CA

In Re Harbaugh’s Estate

v. At or after maturity

vi. In good faith and without notice

C. By intentional cancellation

Sections 119(c), 123, NIL

Jone’s Adm’rs vs. Coleman

D. By any other act which will discharge a contract

Manchester v. Parsons

E. By reacquisition of principal debtor in his own right

Section 119(e), NIL

F. By renunciation of holder

Section 122, NIL

McGlynn vs. Granstrom

SECONDARILY LIABLE

A. In General

Section 120, NIL

B. Tender of payment

Legaspi v. Ca, 142 SCRA 82

C. Renunciation by holder

Section 122, NIL

21

D. Cancellation; unintentional

Section 123, NIL

E. Alteration


EXTINGUISHMENT OF OBLIGATIONS

Article 1231, Civil Code

- Payment or performance

- Loss of the thing due

- Condonation or remission of the debt

- Confusion or merger of rights

- Compensation

- Novation

- Annulment

- Rescission

- Fulfilment of a resolutory condition

- Prescription

22

bills and notes1

Documents

nil section

nil article

nil duress section

civil code section

nil jimenez

nil ponce

nil violago

nil powell