IV.

RIGHTS AND LIABILITIES OF PARTIES

Atty. Rene Alexis P. Villarente

Ateneo de Davao University College of Law

Section 60

PAYEE

INDORSERS
Sec 64 Irreg.

Section 61

DRAWER
Order
Sec. 1 (b)

Sec 69 (20,21,44) Agent

Sec 65 Del/ Quali

Sec 66 General

Sec 67 bearer

Tuazon vs. Heirs of Ramos GR. No. 156262 July 14, 2005; After an
instrument is dishonored by non payment, indorsers ceases to be merely
secondarily liable; they become 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. Drawer is
not indispensable party in an action against the indorser of checks.

PAYEE
Section 62

DRAWEE

Acceptor
Not liable

Metro Bank vs. Cabilzo GR. No. 154469 December 6, 2006; Drawee
who paid under a materially altered instrument, such payment is
not payment done in accordance with the drawers instruction.

Villanueva vs. Nite GR. No. 148211 July 25, 2006; If a (drawee)
bank refuses to pay a check (with sufficient funds), the payeeholder should instead sue the drawer who might in turn sue the
bank. Section 189 is sound law based on logic and established
legal principles: no privity of contract exists between the draweebank and the payee. The Drawer is an indispensable party when
drawee is sued by the payee.

A drawee who did not accept is not liable and may not
be sued (Villanueva vs. Nite, id.) exception:
1. In a suit initiated by the drawer (Solid Bank vs. Arieta,
G.R. No. 152720, February 17, 2005)

Solid Bank vs. Arieta GR. No. 152720 Feb. 17, 2005; A (drawee)
banks gross negligence in dishonoring a well-funded check,
aggravated by its unreasonable delay in repairing the error, calls for
an award of moral and exemplary damages. The resulting injury to
the check writers reputation and peace of mind needs to be
recognized and compensated.

2. In a suit by the payee or holder based on Article 19

of the Civil Code (HSBC vs. Catalan, G.R. 159590, Oct. 18,

HOLDER
Section 51 Simple Holder
Section 26 Holders for Value
Sec. 52/58 Holders in due course

To sue, be paid and to negotiate

RIGHTS OF HOLDERS

MAKER

HOLDER
Section 191 Definition of Terms: Holder means
the payee or indorsee of a bill or note, who is in
possession of it, or the bearer thereof.

BPI vs. Roxas GR. No. 157833 October 15, 2007; Under
Section 52, as a general rule, every holder is presumed
prima facie to be a holder in due course. One who
claims otherwise has the onus probandi to prove that
one or more of the conditions are lacking.

BPI vs. CA and Napiza GR. No. 112392 February 29,

2000; An accommodation party is liable on the
instrument to a holder for value, notwithstanding such
holder at the time of taking the instrument knew him
to be only an accommodation party.

2004)

3. Where the instrument involved is a managers or

certified check (E-PCI vs. Ong, G.R. 156207, September 15, 2004)

Q: Is a collecting bank a holder for value with rights or

a last indorser with liability (PCHC rule 17)?