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
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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
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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
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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
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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
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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
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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
Sections 34, 40, 35, NIL
G. Qualified Indorsement
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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
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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
State Investment House v. CA, 217 SCRA 32
d. Suspicious circumstances
Vicente de Ocampo & Co. v. Gatchalian, 3 SCRA 596
e. Effect of purchase at a discount
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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
Sections 57, 58, NIL
a. Personal defenses
b. Real defenses
State Investment House v. CA, 217 SCRA 32
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
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BPI v. CA, 232 SCRA 302
K. Transfer of unindorsed instrument
Section 49, NIL
Commercial Bank of Lafayette & Trust Co. vs. Barry
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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
Sections 23, 18, NIL
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
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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
Section 124, 125, NIL
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
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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
Section 127, 189, NIL
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
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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
Sections 141, 142, NIL
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
Sections 143, 144, 193, NIL
b. How and when made
Sections 145, 146, NIL
c. When excused
Sections 148, 147, NIL
d. Dishonor and its effects
Sections 149, 150, 151, 89, 117, NIL
K. Presentment of payment
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a. When presentment necessary; effect of non-presentment
Sections 143, 144, 193, NIL
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
Sections 185, 186, NIL
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
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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
Sections 95, 96, NIL
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
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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
Sections 159, 112, NIL
Ellenbogen vs. State Bank
i. Waiver of protest
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Section 111, NIL
j. Protest in case of loss of instrument
Section 160
N. Acceptance for honor
Sections 161, 131, NIL
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
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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
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D. Cancellation; unintentional
Section 123, NIL
E. Alteration
Section 124, 125, NIL
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
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