NEGOTIABLE INSTRUMENTS LAW
Answer the following questions.
COMMERCIAL LAW
1. PN makes a promissory note for P5,000.00 but leaves the name of the payee in blank because he wanted to verify the correct spelling first. He mindlessly left the note on top of his desk at the end of the workday. When he returned the following morning, the note was missing. It turned up later when X presented it to PN for payment. Before X, T, who turned out to have filched the note from PN’s office, had endorsed the note after inserting his own name in the blank space as the payee. PN dishonored the note, contending that he did not authorize its completion and delivery. But X said he had no participation in, or knowledge about, the pilferage and alteration of the note and therefore he enjoys the rights of a holder in due course under the negotiable Instrument Law. Who is correct and why?
2. A check for Fifty Thousand (P50,000.00) Pesos was drawn against drawee bank and made payable to XYZ Marketing or order. The check was deposited to payee’s account at ABC Bank which then sent the check for clearing to drawee bank.
Drawee bank refused to honor the check on ground that the serial number thereof had been altered
XYZ Marketing sued drawee bank.
Is it proper for the drawee bank to dishonor the check for the reason that it had been altered? Explain.
3. Maria issued a issued a negotiable promissory note and authorized Pilar to fill up the amount in blank up to P2,000.00 only. However Pilar fill it out to P4,000.00 and negotiated the note to Pepe . For what amount are Maria and PIlar liable to Pepe ? Explain.
4. “A” succeeded in making “B” affix his signature on a bank check without his (B’s) knowing that it was a check. At the time of signing, the check was complete in all respects. “A” intended to cash the check the following morning, but that night it was stolen by “C” who succeeded in negotiating the same to “D”, a holder in due course, “D” cashed the check the following morning. “B” refused to have the amount of the check deducted from his bank deposit.
Who may properly be charged with the amount of the check? Reason out your answer.
5. A single proprietor of a business concern is about to leave for a business trip and, as he so often does on these occasions, signs several checks in blank. He instructs B, his secretary, to safekeep the checks and fill them out when and as required to pay accounts during his absence. B fills out one of the checks by placing her name as payee, fills in the amount, endorses and delivers the check to C who accepts it in good faith as payment for goods sold to B. B regrets her action and tells A what she did. A directs the bank in time to dishonor the check. When C encashes the check, it is dishonored.
Can A be held liable to C?
6. “A” signed a blank check which he inadvertently left on his desk at his Escolta office. The same was later stolen by B, who filled in the amount of P22,300.00 and a fictitious name as payee. B then endorsed the check in the payee’s name and passed the check to c; thereafter C passé it to D; then D to E, and E to F.
Can F enforce the instrument against A? Explain.
Suppose that F is a holder in due course what will be your answer? Explain.
Can F enforce the instrument against B? Against C? Give reasons.
7. Juan makes a negotiable promissory note payable to his order, signing Pedro’s name thereon as maker without Pedro’s knowledge and consent. Juan then indorses the note to Jose, who, in turn, indorses it to Carlos under circumstances which make Carlos a holder in due course. May Carlos enforce the note against Pedro? And if the note is dishonored by Pedro, may Carlos hold Juan and Jose liable on their respective indorsements? Reason out your answer.
8. Juan makes a promissory note payable to the order of Pedro, who indorses it to Jose. Somehow, Roberto obtains possession of the note and, forging the signature of Jose, indorses it to Amado. Amado then indorses the note to Niño, the holder. State the rights and liabilities of the parties.
9. Larry issued a negotiable promissory note to Evelyn and authorized the latter to fill up the amount in blank with his loan account in the sum of P1,000.00. However, Evelyn inserted P5,000.00 in violation of the instruction. She negotiated the note to Julie who had knowledge of the infirmity. Julie in turn negotiated the said note to Devi for value and who had no knowledge of the infirmity.
Can Devi enforce the note against Larry and if she can, for how much? Explain.
Supposing Devi endorses the note to Baby for value but who has knowledge of the infirmity, can the latter enforce the note against Larry?
10. A executed a bill of exchange for P500.00 in favor of B, who altered the amount to P5,000.00 and presented the bill to the drawee for acceptance. The drawee, not knowing of the alteration which was neatly done, accepted the bill. Thereafter, B negotiated, the bill to C, who now seeks to hold the drawee liable for P5,000.00. The drawee contends that under the rule on alteration, he can only be liable up to P500.
Is the drawee’s contention tenable? Reason.
Can the drawee debit the account of A and , if so, to what extent? Reason.
11. Pedro writes out a check for P1,000.00 in favor of Jose or order against his current account with Bank of America. Juan steals the checks, erases the name of Jose and superimposes his own name. Juan deposits the check at Citibank and after clearing; Juan withdraws the amount and absconds. Upon discovery, by Pedro of the material alteration, he lodged a complaint at the Bank of America, who credited the amount to Pedro. Bank of America demands reimbursement from Citibank which refuses on the ground that it only acted as an agent for collection. Who bears the loss? Why?
12. In consideration of some goods he bought, A issued to B a personal check in the amount of P280.00. Without the knowledge of A, B raised the amount of P2,800.00. The alteration is not apparent to the naked eye. B then deposited the altered check in his account with the PNB, which released it for clearing. The Bank of P.I. which is the drawee bank did not notice the alteration and the sheck was therefore cleared.
B was able to withdraw the P2,800.00, after which he closed his account. When A received his bank statement, and cancelled checks for the month, he noticed the discrepancy in the amount when he compared the altered check with his check stub. He immediately notified the Bank of P.I. in turn demanded recredit from the PNB, which cannot now locate B. Discuss the rights and liabilities of the parties under the circumstances.
13. Sumabod issued a promissory note to the order of Panloob as consideration for the textiles purchased from the latter. The promissory note recites that the amount of P100,00.00 is payable in five months installments ofP20,000.00 each, beginning on December 1, 1986 and every first day of the month thereafter until fully paid, provided that the holder may declare the entire amount due and demandable in the event the maker fails to pay on time any installment in full, or whenever the holder for valid reasons find his claim unsecured. Panloob indorsed and delivered the note for value to Humabol who acted in good faith.
Panloob’s factory burns down and he is unable to deliver the textiles. Sumabod does not pay as promised.
An Humabol as an innocent purchaser for value hold Sumabod liable to the promissory note? Explain.
14. Romeo had P100,000.00 in his current account at the Matatag Banking Corporation . Romeo learned that his enemy had hired a contract killer to liquidate him. Fearful for his life, he mailed to his fiancée, Juliet, a check for his P100,000.00 in the bank. The check was payable to Juliet or order and was accompanied by a letter stating, that he was giving her his money out of his great love for her and because something would happen to him anytime now. Juliet presented the check for payment but the bank refused to honor it. Does Juliet have any right of action against the bank? Explain.
15. To accommodate Carmen, drawer of a promissory note, Jorge signed as an indorser thereon, and the instrument was negotiated to Raffy, a holder for value. At the time Raffy took the instrument, he knew Jorge to be an accommodation party only. When the promissory note was not paid, and Raffy discovered that Carmen had no funds, he sued Jorge. Jorge pleads in defense the fact that he had indorsed the instrument without receiving value therefore, and the further fact that Raffy knew that at the time he took the instrument Jorge had not received any value or consideration of any kind for his indorsement.
Is Jorge liable? Discuss with reason.
16. Juan Sy purchased from “A” Appliance Center 1 (one) generator set on installment with chattel mortgage in favor of the vendor. After getting hold of the generator set, Juan Sy immediately sold it without consent of the vendor. Juan Sy was criminally charge with estafa.
To settle the case extra-judicially, Juan Sy paid the sum of P20,000.00 and for the balance of P5,000.00, he executed a promissory note for said amount Ben Lopez as an accommodation party. Juan Sy failed to pay the balance.
a. What is the liability of Ben Lopez as an accommodation party? Explain.
b. What is the liability of Juan Sy?
17. Susan Kawada borrowed P500,000.00 from XYZ Bank which required her, together with Rose Reyes who did not receive any amount from the bank , to execute a promissory note payable to the bank , or its order, on stated maturities. The note was executed as so agreed. What kind of liability was incurred by Rose, that of an accommodation party or that of a solidary debtor? Explain.
18. Pacido, a bank depositor, left his checkbook on his house. Unknown to him, a visitor at the time, noticing the same, took a check therefrom, filled it up in the amount of P3,000.00 and succeed in encashing the check on the same day. Placido’s account was thereby debited in the same amount.
Discovering the erroneous debit, Placido demanded that the bank credit him with a like amount. The bank refused on the ground that Placido was negligent in leaving his checkbook on his desk so that he could not put up the defense of forgery or want of authority under the Negotiable Instruments Law.
The facts disclose that even to the naked eye, there were marked differences between Placido’s signature and the one on the check forge by the visitor.
As between Placido and the bank, who should bear the loss? Explain.
19. Fernando forged the name of Daniel, manager of Trading Company, as the drawer of the check. The Bank of the Philippine Islands, the drawee bank did not detect the forgery and paid the amount.
May the bank charge the amount paid against the account of the alleged drawer? Reasons.
20. B forged A’s signature as drawer of a check drawn on Citibank. The check was purportedly payable to the order of B. b then indorsed the check to C, a holder in due course, who deposited the same to his account with Bank of P.I. The check passed through the normal course of clearing and accordingly the drawee, Citibank, credited the collecting bank, Bank of P.I., with the amount of the check which Citibank in turn debited from A’s deposit account. Upon receiving his monthly statement from Citibank, together with the cancelled checks debited from his deposit account, a discovered the forgery.
Can A compel Citibank to recredit to his account the amount of the forged check?
Does Citibank in turn have recourse against the collecting bank, Bank of P.I.? Explain.
Can Citibank or Bank of P.I., as the case may be, proceed against C as indorser? Explain.
1. PN makes a promissory note for P5,000.00 but leaves the name of the payee in blank because he wanted to verify the correct spelling first. He mindlessly left the note on top of his desk at the end of the workday. When he returned the following morning, the note was missing. It turned up later when X presented it to PN for payment. Before X, T, who turned out to have filched the note from PN’s office, had endorsed the note after inserting his own name in the blank space as the payee. PN dishonored the note, contending that he did not authorize its completion and delivery. But X said he had no participation in, or knowledge about, the pilferage and alteration of the note and therefore he enjoys the rights of a holder in due course under the negotiable Instrument Law. Who is correct and why?
2. A check for Fifty Thousand (P50,000.00) Pesos was drawn against drawee bank and made payable to XYZ Marketing or order. The check was deposited to payee’s account at ABC Bank which then sent the check for clearing to drawee bank.
Drawee bank refused to honor the check on ground that the serial number thereof had been altered
XYZ Marketing sued drawee bank.
Is it proper for the drawee bank to dishonor the check for the reason that it had been altered? Explain.
3. Maria issued a issued a negotiable promissory note and authorized Pilar to fill up the amount in blank up to P2,000.00 only. However Pilar fill it out to P4,000.00 and negotiated the note to Pepe . For what amount are Maria and PIlar liable to Pepe ? Explain.
4. “A” succeeded in making “B” affix his signature on a bank check without his (B’s) knowing that it was a check. At the time of signing, the check was complete in all respects. “A” intended to cash the check the following morning, but that night it was stolen by “C” who succeeded in negotiating the same to “D”, a holder in due course, “D” cashed the check the following morning. “B” refused to have the amount of the check deducted from his bank deposit.
Who may properly be charged with the amount of the check? Reason out your answer.
5. A single proprietor of a business concern is about to leave for a business trip and, as he so often does on these occasions, signs several checks in blank. He instructs B, his secretary, to safekeep the checks and fill them out when and as required to pay accounts during his absence. B fills out one of the checks by placing her name as payee, fills in the amount, endorses and delivers the check to C who accepts it in good faith as payment for goods sold to B. B regrets her action and tells A what she did. A directs the bank in time to dishonor the check. When C encashes the check, it is dishonored.
Can A be held liable to C?
6. “A” signed a blank check which he inadvertently left on his desk at his Escolta office. The same was later stolen by B, who filled in the amount of P22,300.00 and a fictitious name as payee. B then endorsed the check in the payee’s name and passed the check to c; thereafter C passé it to D; then D to E, and E to F.
Can F enforce the instrument against A? Explain.
Suppose that F is a holder in due course what will be your answer? Explain.
Can F enforce the instrument against B? Against C? Give reasons.
7. Juan makes a negotiable promissory note payable to his order, signing Pedro’s name thereon as maker without Pedro’s knowledge and consent. Juan then indorses the note to Jose, who, in turn, indorses it to Carlos under circumstances which make Carlos a holder in due course. May Carlos enforce the note against Pedro? And if the note is dishonored by Pedro, may Carlos hold Juan and Jose liable on their respective indorsements? Reason out your answer.
8. Juan makes a promissory note payable to the order of Pedro, who indorses it to Jose. Somehow, Roberto obtains possession of the note and, forging the signature of Jose, indorses it to Amado. Amado then indorses the note to Niño, the holder. State the rights and liabilities of the parties.
9. Larry issued a negotiable promissory note to Evelyn and authorized the latter to fill up the amount in blank with his loan account in the sum of P1,000.00. However, Evelyn inserted P5,000.00 in violation of the instruction. She negotiated the note to Julie who had knowledge of the infirmity. Julie in turn negotiated the said note to Devi for value and who had no knowledge of the infirmity.
Can Devi enforce the note against Larry and if she can, for how much? Explain.
Supposing Devi endorses the note to Baby for value but who has knowledge of the infirmity, can the latter enforce the note against Larry?
10. A executed a bill of exchange for P500.00 in favor of B, who altered the amount to P5,000.00 and presented the bill to the drawee for acceptance. The drawee, not knowing of the alteration which was neatly done, accepted the bill. Thereafter, B negotiated, the bill to C, who now seeks to hold the drawee liable for P5,000.00. The drawee contends that under the rule on alteration, he can only be liable up to P500.
Is the drawee’s contention tenable? Reason.
Can the drawee debit the account of A and , if so, to what extent? Reason.
11. Pedro writes out a check for P1,000.00 in favor of Jose or order against his current account with Bank of America. Juan steals the checks, erases the name of Jose and superimposes his own name. Juan deposits the check at Citibank and after clearing; Juan withdraws the amount and absconds. Upon discovery, by Pedro of the material alteration, he lodged a complaint at the Bank of America, who credited the amount to Pedro. Bank of America demands reimbursement from Citibank which refuses on the ground that it only acted as an agent for collection. Who bears the loss? Why?
12. In consideration of some goods he bought, A issued to B a personal check in the amount of P280.00. Without the knowledge of A, B raised the amount of P2,800.00. The alteration is not apparent to the naked eye. B then deposited the altered check in his account with the PNB, which released it for clearing. The Bank of P.I. which is the drawee bank did not notice the alteration and the sheck was therefore cleared.
B was able to withdraw the P2,800.00, after which he closed his account. When A received his bank statement, and cancelled checks for the month, he noticed the discrepancy in the amount when he compared the altered check with his check stub. He immediately notified the Bank of P.I. in turn demanded recredit from the PNB, which cannot now locate B. Discuss the rights and liabilities of the parties under the circumstances.
13. Sumabod issued a promissory note to the order of Panloob as consideration for the textiles purchased from the latter. The promissory note recites that the amount of P100,00.00 is payable in five months installments ofP20,000.00 each, beginning on December 1, 1986 and every first day of the month thereafter until fully paid, provided that the holder may declare the entire amount due and demandable in the event the maker fails to pay on time any installment in full, or whenever the holder for valid reasons find his claim unsecured. Panloob indorsed and delivered the note for value to Humabol who acted in good faith.
Panloob’s factory burns down and he is unable to deliver the textiles. Sumabod does not pay as promised.
An Humabol as an innocent purchaser for value hold Sumabod liable to the promissory note? Explain.
14. Romeo had P100,000.00 in his current account at the Matatag Banking Corporation . Romeo learned that his enemy had hired a contract killer to liquidate him. Fearful for his life, he mailed to his fiancée, Juliet, a check for his P100,000.00 in the bank. The check was payable to Juliet or order and was accompanied by a letter stating, that he was giving her his money out of his great love for her and because something would happen to him anytime now. Juliet presented the check for payment but the bank refused to honor it. Does Juliet have any right of action against the bank? Explain.
15. To accommodate Carmen, drawer of a promissory note, Jorge signed as an indorser thereon, and the instrument was negotiated to Raffy, a holder for value. At the time Raffy took the instrument, he knew Jorge to be an accommodation party only. When the promissory note was not paid, and Raffy discovered that Carmen had no funds, he sued Jorge. Jorge pleads in defense the fact that he had indorsed the instrument without receiving value therefore, and the further fact that Raffy knew that at the time he took the instrument Jorge had not received any value or consideration of any kind for his indorsement.
Is Jorge liable? Discuss with reason.
16. Juan Sy purchased from “A” Appliance Center 1 (one) generator set on installment with chattel mortgage in favor of the vendor. After getting hold of the generator set, Juan Sy immediately sold it without consent of the vendor. Juan Sy was criminally charge with estafa.
To settle the case extra-judicially, Juan Sy paid the sum of P20,000.00 and for the balance of P5,000.00, he executed a promissory note for said amount Ben Lopez as an accommodation party. Juan Sy failed to pay the balance.
a. What is the liability of Ben Lopez as an accommodation party? Explain.
b. What is the liability of Juan Sy?
17. Susan Kawada borrowed P500,000.00 from XYZ Bank which required her, together with Rose Reyes who did not receive any amount from the bank , to execute a promissory note payable to the bank , or its order, on stated maturities. The note was executed as so agreed. What kind of liability was incurred by Rose, that of an accommodation party or that of a solidary debtor? Explain.
18. Pacido, a bank depositor, left his checkbook on his house. Unknown to him, a visitor at the time, noticing the same, took a check therefrom, filled it up in the amount of P3,000.00 and succeed in encashing the check on the same day. Placido’s account was thereby debited in the same amount.
Discovering the erroneous debit, Placido demanded that the bank credit him with a like amount. The bank refused on the ground that Placido was negligent in leaving his checkbook on his desk so that he could not put up the defense of forgery or want of authority under the Negotiable Instruments Law.
The facts disclose that even to the naked eye, there were marked differences between Placido’s signature and the one on the check forge by the visitor.
As between Placido and the bank, who should bear the loss? Explain.
19. Fernando forged the name of Daniel, manager of Trading Company, as the drawer of the check. The Bank of the Philippine Islands, the drawee bank did not detect the forgery and paid the amount.
May the bank charge the amount paid against the account of the alleged drawer? Reasons.
20. B forged A’s signature as drawer of a check drawn on Citibank. The check was purportedly payable to the order of B. b then indorsed the check to C, a holder in due course, who deposited the same to his account with Bank of P.I. The check passed through the normal course of clearing and accordingly the drawee, Citibank, credited the collecting bank, Bank of P.I., with the amount of the check which Citibank in turn debited from A’s deposit account. Upon receiving his monthly statement from Citibank, together with the cancelled checks debited from his deposit account, a discovered the forgery.
Can A compel Citibank to recredit to his account the amount of the forged check?
Does Citibank in turn have recourse against the collecting bank, Bank of P.I.? Explain.
Can Citibank or Bank of P.I., as the case may be, proceed against C as indorser? Explain.
21. Jose loaned Mario some money and , to evidence his indebtedness, Mario executed and delivered to Jose promissory note payable to his order.
Jose indorsed the note to Pablo. Bert fraudulently obtained the note from Pablo and indorsed it to Julian by forging Pablo’s signature. Julian then indorsed the note to Camilo.
may Camilo enforce the said promissory note against Mario and Jose?
May Camilo go against Pablo?
May Camilo enforce said note against Julian?
Against whom can Julian have the right to recourse?
May Pablo recover from either Mario or Jose? Explain your answer.
22. X makes a promissory note for P500.00 payable to A, a minor, to help him buy school books. A indorses the note to B who, in turn , indorses the note to C, C knows A’s minority. If C sues X on the note, can X set up the defenses of minority and lack of consideration?
Jose indorsed the note to Pablo. Bert fraudulently obtained the note from Pablo and indorsed it to Julian by forging Pablo’s signature. Julian then indorsed the note to Camilo.
may Camilo enforce the said promissory note against Mario and Jose?
May Camilo go against Pablo?
May Camilo enforce said note against Julian?
Against whom can Julian have the right to recourse?
May Pablo recover from either Mario or Jose? Explain your answer.
22. X makes a promissory note for P500.00 payable to A, a minor, to help him buy school books. A indorses the note to B who, in turn , indorses the note to C, C knows A’s minority. If C sues X on the note, can X set up the defenses of minority and lack of consideration?
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