NEGOTIABLE INSTRUMENTS NOTES

BASED ON AGBAYANIS BOOK AND ATTY. MERCADOS LECTURES

Page 88 of 190


BY: MA. ANGELA LEONOR C. AGUINALDO
ATENEO LAW 2D BATCH 2010
of cavans, only a certain portion has been paid for. In payment thereof,
checks have been issued but on presentment, the checks were dishonored.
Respondents alleged that since spouses anticipated the forthcoming suit
against them, they made fictitious sales over their properties. As defense,
the spouses averred that it was the wife of Bartolome who effected the sale
and that Maria was merely her agent in selling the rice. The true buyer of
the cavans was Santos. The spouses further averred that when Ramos got
the check from Santos, she took it in good faith and didn't knew that the
same were unfunded.

HELD:
First, there is no contract of agency.

If it was truly the intention of the parties to have a contract of agency,
then when the spouses sued Santos on a separate civil action, they should
have instituted the same on behalf and for the respondents. They didn't do
so. The filing in their own names negate their claim that they acted as
mere agents in selling the rice.

Second, the spouses are liable on the check.

As indorser, Tuazon warranted that upon due presentment, according to
their tenor, and that in case they were dishonored, she would pay the
corresponding amount. After the instrument is dishonored by non-
payment, indorsers cease to be merely secondarily liable. They became
principal debtors whose liability becomes identical to that of the original
obligor. The holder of a negotiable instrument need not even proceed
against the maker before suing the indorser. Santos is not an
indispensable party to the suit against the spouses.

Sec. 64. Liability of irregular indorser. - Where a person, not
otherwise a party to an instrument, places thereon his signature in
blank before delivery, he is liable as indorser, in accordance with
the following rules:

(a) If the instrument is payable to the order of a third person,
he is liable to the payee and to all subsequent parties.

(b) If the instrument is payable to the order of the maker or
drawer, or is payable to bearer, he is liable to all parties
subsequent to the maker or drawer.

(c) If he signs for the accommodation of the payee, he is liable
to all parties subsequent to the payee.

IRREGULAR INDORSEMENT
An irregular indorser is one who not otherwise a party to an
instrument, places his signature thereon his signature in blank before
delivery

IRREGULAR INDORSEMENT
Its an indorsement in an unusual, peculiar, or singular manner
His name appears where he would naturally expect another name

BEFORE DELIVERY
It means the initial delivery
Provision doesnt apply if the signature was placed after delivery

PAY TO X OR HIS ORDER P1000
SGD. B

SGD. Y
PAY TO D SGD. X
PAY TO E SGD. D

Sec. 65. Warranty where negotiation by delivery and so forth.
Every person negotiating an instrument by delivery or by a
qualified indorsement warrants:

(a) That the instrument is genuine and in all respects what it
purports to be;

(b) That he has a good title to it;

(c) That all prior parties had capacity to contract;

(d) That he has no knowledge of any fact which would impair
the validity of the instrument or render it valueless.

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.

APPLICATION OF SECTION 65