Bar Questions in Negotiable Instrument
Which of the opposing views is correct? Explain [2000 Bar
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Negotiable Instruments Law
GENERAL PRINCIPLES
A. THEORY
01. What are the requisites of a negotiable instruments? [1953,
1954, 1964, 1968, 1989, 1991, 1996, Bar Examinations].
02. What constitutes a holder in due course? [1996, Bar
Examinations].
03. Can a bill of exchange or a promissory note qualify as a
negotiable instrument if -
a.It is not dated; or
b.The date and the month, but not the year of its maturity is
given; or
c.It is payable to cash; or
d.It names two alternative drawees [1997, Bar Examinations].
04. A promissory note reads as follows: “I promise to pay
Gabriela Silangan P1,000.00 three years after the
unconditional withdrawal of the U.S. of its military bases in the
Philippines.” Discuss the negotiability or non-negotiability of the
note above [1966 Bar Examinations].
05. Can the payee in a promissory note be a ‘holder in due
course’ within the meaning of the Negotiable Instruments Law?
[2000 Bar Examinations].
06. How do you treat a negotiable instrument that is so
ambiguous that there is a doubt whether it is a bill or a note?
[1999, Bar Examinations].
07. When a signature is so placed upon a negotiable
instrument that it is not clear in what capacity the person
making the same intended to sign, what is his liability? [1946,
Bar Examinations].
08. When a negotiable instrument contains the words “I
promise to pay” and is signed by two or more persons, what is
their liability, joint or solidary? Explain [1946, Bar
Examinations].
B. TESTS OF NEGOTIABILITY
09. MP bought a used cellphone from JR. JR preferred cash
but MP is a friend so JR accepted MP’s promissory note for
P10,000.00. JR though of converting the note into cash by
indorsing it to his brother KR. The promissory note is a piece of
paper with the following hand-printed notation: “MP WILL PAY
JR P10,000.00 IN PAYMENT FOR HIS CELLPHONE ONE
WEEK FROM TODAY”. Below this notation is MP’s signature
with “8/1/00 next to it, indicating the date of the promissory
note. When JR presented MP’s note to KR, the latter said it
was not a negotiable instrument under the law and so could
not be a valid cash substitute. JR took the opposite view,
Bar Questions in Negotiable Instrument
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Negotiable Instruments Law
insisting on the note’s negotiability. You are asked to referee .
Examinations].
10. Perla bought a motor car payable in installments from
Automotic Company for P250,000.00 with a P50,000.00
downpayment. She executed a promissory note for the
balance which reads:
For value received, I promise to pay Automotive Company or
order at its office in Legaspi City, the sum of P200,000.00 with
interest at 12% per annum, payable in equal installments of
P20,000.00 for ten (10) months starting 21 October 2002.
SGD Perla
Manila, 21 September 2002
Automotive Company subsequently indorsed the note to
Reliable Finance Corporation which financed the purchase.
Perla defaulted in the payment of her installments. Is the above
promissory note a negotiable instrument? Explain [1992 Bar
Examinations].
11. Romeo had P100,000.00 in his current account at Matatag
Banking Corporation. Romeo learned that his enemy had hired
a contract killer to liquidate him. Fearful of his life, he mailed to
his fiance, 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? Because of the humiliation she suffered from
the bank, Juliet broke off her engagement with Romeo. Does
Romeo have a right of action against the bank? Explain [1986
Bar Examination].
12. Explain whether or not the following instrument is
negotiable.
P1,000.00 Manila, October 5, 1970
I acknowledge to have received from Jose Cruz one thousand
pesos (P1,000.00) which I promise to pay on demand or in five
months from date with one percent interest per month payable
within the first five days of every month. If the interest is not
paid when due, then both principal and interest shall become
due at the option of the holder.
SGD: Pedro Garcia
[1970 Bar Examination].
13. For value received, X executed a promissory note in favor
of Y for P10,000.00 agreeing to pay interest thereon but
without specifying the rate thereof. Can Y collect interest on
the note? Why? Explain [1964 Bar Examination].
DEFENSES
C. FAILURE/ABSENCE OF CONSIDERATION
14. In payment of canned goods he had purchased, Pedro
Flores of Cabanatuan drew a check upon PNB for P1,000.00
payable to the order of Veraz and Co., the seller in Manila. He
sent the check “without recourse” to Juan Santos. The latter
indorsed it in blank, for consideration, to Pablo Reyes, who, in
turn, sold it for P800.00, by delivery to Antonio Gomez. The
canned goods were never forwarded to Flores. Gomez
presented the check to the bank, but payment was refused
because Reyes had not put his name on it. Is the bank right in
so refusing? Why? If Gomez gave due notice to Veraz and
Co., may he recover from the latter? May Gomez recover from
Santos? Why? May he recover from Reyes? Why? [1968 Bar
Examination].
15. Eva issued to Imelda a check in the amount of P50,000.00
post-dated September 19, as security for a diamond ring to be
sold on commission. On September 15, Imelda negotiated the
check to MT Investment which paid the amount of P40,000.00
to her. Eva failed to sell the ring, so she returned it to Imelda
on September 19. Unable to retrieve her check, Eva withdrew
her funds from the drawee bank. Thus, when MT Investment
presented the check for payment, the drawee bank dishonored
it. Later on, when MT Investment sued her, Eva raised the
defense of absence of consideration, the check having been
issued merely as security for the ring that she could not sell.
Does Eva have a valid defense? Explain [1996, Bar
Examination].
16. A and B executed and delivered to C a promissory note
which reads: “I promise to pay C or bearer the sum of
P2,000.00 with interest at 12% per annum on or before June
30, 1960. Manila, February 1, 1969. SGD A and B. Two
months later, for value received, C delivered to D the aforesaid
note with the indorsement: “Pay to D”; and on April 15, 1969,
the said note was indorsed in blank by D and delivered to X,
without consideration. Upon A’s refusal to pay despite demand,
X filed an action to collect from A the total amount of the
promissory note, with 12% interest per annum from February
1, 1969, and the costs. A’s defenses are that the note is null
and void because the same was issued to pay a gambling debt
and that in any event, his liability cannot exceed more than
one-half of the amount due. Are A’s defenses valid? Is X
entitled to the whole amount of the note? Explain. [1969 Bar
Examination].
17. For the purpose of lending his name without receiving
value therefor, Pedro makes a note for P20,000.00 payable to
the order of X who in turn negotiates it to Y, the latter knowing
that Pedro is not a party for value. May Y recover from Pedro if
the latter imterposes absence of consideration? Supposing
Bar Questions in Negotiable Instrument
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under the same facts, Pedro pays the said P20,000.00, may he
recover the same amount from X? Explain [1998 Bar
Examination].
18. Nora applied for a loan of P100,000.00 with BUR Bank. By
way of accommodation, Nora’s sister, Vilma, executed a
promissory note in favor of BUR Bank. When Nora defaulted,
BUR Bank sued Vilma, despite its knowledge that Vilma
received no part of the loan. May Vilma be held liable? Explain
[1996 Bar Examination].
19. Santos purchased Vera’s car for P50,000.00. Not having
enough cash on hand, Santos offered to pay in check. Vera
refused to accept the check unless it is indorsed by Reyes,
their mutual friend. Reyes indorsed Santos’ check and Vera,
knowing that Reyes had not received any value for indorsing
the check, accepted it. The next day, Vera presented the check
to the drawee bank for payment. Payment was refused for lack
of funds. Vera gave notice of dishonor to Reyes, but Reyes
refused to pay, saying that he indorsed merely as a friend. Is
Reyes liable to Vera? In the event Reyes voluntarily pays Vera,
does Reyes have the right to recover from Santos? Explain
[1985 Bar Examination].
D. INCOMPLETE DELIVERED INSTRUMENT
20. 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 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? Supposing Devi indorses
the note to Baby for value but who has knowledge of the
infirmity, can the latter enforce the note against Larry? Explain
[1993 Bar Examination].
21. Maria issued a negotiable promissory note and authorized
Pilar to fill-up the amount in blank up to P2,000.00. However,
Pilar filled it up to P4,000.00 and negotiated the note to Pepe.
For what amounts are Maria and Pilar liable to Pepe? Explain
[1972 Bar Examinations].
E. INCOMPLETE UNDELIVERED INSTRUMENT
22. PN makes a promissory note for P5,000.00, but leaves the
name of the payee in blank because he wanted to verify its
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 Instruments Law.
Who is correct and why? [2000 Bar Examination].
23. Jose makes a negotiable note payable to bearer with the
amount in blank and delivers it to Karen for safekeeping.
Marina fills up the note for P20,000.00 and negotiates it to
Adriano, a holder in due course. If you were Jose and Adriano
presented to you the note for payment, what defense or
defenses are you going to interpose to negate liability on the
instrument? Explain [1981 Bar Examinations].
24. A entrusted to B, his secretary, a blank check drawn on X
bank, signed by him, with instructions to fill up the check in
favor of D for the amount of P1,000.00 and to thereafter deliver
the said check to D. In breach of trust, B filled up the check by
writing the name of E, and the amount of P2,000.00 on the
check and delivered the same to E, who accepted it in
payment of certain goods sold by E to B. Before E could
encash the check, A learned of the misdeed of B and issued a
stop-payment order to X bank as a result of which X bank
refused to honor the check presented to it by E. Can E now
hold X bank and A liable? Reason [1971 Bar Examinations].
25. Jose Reyes signed a blank check, and in his hasted to
attend a party, left the check on top of his executive desk in his
office. Later, Nazareno forced the door to Reyes’ office and
stole the blank check. Nazareno immediately filled in the
amount of P50,000.00 and a fictitious name as payee on the
said check. Nazareno then endorsed the check in the payee’s
name and passed it to Roldan. Thereafter, Roldan endorsed
the check to Dantes. Can Dantes enforce the check against
Jose Reyes? If Dantes is a holder in due course, will your
answer be the same? [1985 Bar Examinations].
26. A signed a blank check which he inadvertently left at 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 passed it to D; then D to E;
and E to F. Can F enforce the instrument against A? Suppose
that F is a holder in due course, what will be your answer? Can
F enforce the instrument against B? Against C. Give reasons
[1978 Bar Examinations].
F. FORGERY
27. A delivers a bearer instrument to B. B then specially
indorses it to C, and C later indorses it in blank to D. E steals
the instrument from D and, forging the signature of D,
succeeds in “negotiating” it to F who acquires the instrument in
good faith and for value. If, for any reason, the drawee bank
refuses to honor the check, can F enforce the instrument
Bar Questions in Negotiable Instrument
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Negotiable Instruments Law
against the drawer? In case of the dishonor of the check by
both the drawee and the drawer, can F hold any of B, C and D
liable secondarily on the instrument? [1997 Bar Examinations].
28. Juan makes a 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 answers [1989 Bar
Examinations].
29. 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 Nilo,
the holder. State the rights and liabilities of the parties [1984
Bar Examinations].
30. A makes a negotiable promissory note payable to B or
bearer. A delivers the note to B. B indorses the note to C. C
places the note in his wallet, which was stolen by X, who,
finding the note, indorses it to D by forcing C’s signature. D
indorses the note to E, who in turn, delivers the note to F, a
holder in due course, without indorsement. What are the
liabilities of A, B and C to F. Explain briefly [1981 Bar
Examinations].
31. Juan de la Cruz signs a promissory note payable to Pedro
Lim or bearer, and delivers it personally to Pedro Lim. The
latter somehow misplaces the said note and Carlos Ros finds
the note lying around the corridor of the building. Carlos Ros
endorses the promissory note to Juana Bond, for value, by
forging the signature of Pedro Lim. May Juana Bond hold Juan
de la Cruz liable on the note? Explain [1980 Bar
Examinations].
32. Fernando forged the name of Daniel, manager of a Trading
Company, as the drawer of a check. The Bank of 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? Explain [1977 Bar
Examinations].
G. FRAUD
33. A succeeded in making B affix his signature on a check
without 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? Explain your answer [1961 Bar Examinations].
34. A induces B by fraud to make a promissory note payable
on demand to the order of A in the sum of P5,000.00. Can A
file an action successfully against the maker B for the amount
of the note? Reasons. Going further, A transfers the note to C
who pays P5,000.00 therefor and acquires the note under
circumstances that make him (C) as holder in due course. Can
C file an action successfully against B, the maker of the note,
for the amount of the note? What defense/defenses can B
interpose? Explain [1978 Bar Examinations].
H. MATERIAL ALTERATION
35. A check for P50,000.00 was drawn against drawee bank
and made payable to XYZ Marketing or order. The check was
deposited with payee’s account at ABC Bank which then sent
the check for clearing to drawee bank. Drawee bank refused to
honor the check on the 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? In instant suit, drawee bank
contended that XYZ Marketing as payee could not sue the
drawee bank as there was no privity between them. Drawee
theorized that there was no basis to make it liable for the
check. Is this contention correct? Explain [1999 Bar
Examinations].
36. William issued to Albert a check for P10,000.00 drawn on
XM Bank. Albert altered the amount of the check to
P210,000.00 and deposited the check to his account with ND
Bank. When ND Bank presented the check for payment
through the Clearing House, XM Bank honored it. Thereafter,
Albert withdrew the amount of P210,000.00 and closed his
account. When the check was returned to him after a month,
William discovered the alteration. XM Bank recredited
P210,000.00 to William’s current account and sought
reimbursement from ND Bank. ND Bank refused, claiming that
XM Bank failed to return the altered check within the 24 hour
clearing period. Who, as between XM Bank and ND Bank,
should bear the loss? Explain [1996 Bar Examinations].
37. In consideration of some goods he bought, A issued to B a
personal check in the amount of P280.00 which B altered to
P2,800.00 without the knowledge of A. The alteration is not
apparent to the naked eye. B then deposited the altered check
in his account with PNB, which released it for clearing. The
BPI, the drawee bank, did not notice the alteration and the
check 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, he noticed
the discrepancy in the amount when he compared the altered
check with his check stub. He immediately notified BPI and
Bar Questions in Negotiable Instrument
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demanded a recredit. BPI, in turn, demanded recredit from
PNB which cannot now locate B. Can A compel BPI to recredit
his account? If so, how much? Can PNB be compelled to
reimburse BPI of the amount the latter may have recredit to the
account of A? Explain [1986 Bar Examinations].
38. Pedro writes out a check for P1,000.00 in favor of Jose or
order against his current account with the Bank of America.
Juan steals the check, 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 debited the
amount to Pedro. Bank of America demands reimbursement
for Citibank which refuses on the ground that it only acted as
an agent for collection. Who bears the loss? Why? [1977 Bar
Examinations].
39. Maria issued a negotiable promissory note and authorized
Pilar to fill up the amount in blank up to P2,000.00 only.
However, Pilar filled it up to P4,000.00 and negotiated the note
to Pepe. For what amount are Maria and Pilar liable to Pepe?
Explain [1972 Bar Examinations].
40. 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,
N 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 P500.00. Is the
drawee’s contention tenable? Can the drawee debit the
amount of A, and if so, to what extent? Reasons [1971 Bar
Examinations].
I. MINORITY
41. X makes a promissory note for P10,000.00 payable to A, a
minor, to help him to buy school books. A endorses the note to
B for value, who in turn endorses the note to C. C knows A is a
minor. If C sues X on the note, can X set up the defenses of
minority and lack of consideration? Explain [1998 Bar
Examinations].
42. X, without receiving consideration therefor, 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 presents the
note to X for payment, what are the possible defenses to be
interposed by X? If C sues X on the note, can X set up the
defense of minority and lack of consideration? Explain [1989
Bar Examinations].
WARRANTIES/LIABILITIES

J. ACCEPTOR
43. X draws a check against his current account with Ortigas
Branch of Bonifacio Bank in favor of B. Although X does not
have sufficient funds, the bank honors the check when it was
presented to payment. Apparently, X has conspired with the
bank’s bookkeeper so that his ledger card would show that he
still has sufficient funds. The bank files an action for recovery
of the amount paid to B because the check presented has no
sufficient funds. Decide the case [1998 Bar Examinations].
K. NEGOTIATOR BY DELIVERY
44. Anna makes a promissory note payable to bearer and
delivers it to Bing. In turn, Bing negotiates it by mere delivery to
Carmen, who indorses it specially to Dong. Dong negotiates it
by special indorsement to Emma, who negotiates it to Fe by
mere delivery. Anna did not pay. To whom are Bing and
Carmen liable? To whom are Dong and Emma liable? Explain
[1988 Bar Examinations].
L. INDORSERS
45. Alex issued a negotiable promissory note (PN) payable to
Benito or order in payment of certain goods. Benito indorsed
the PN to Celso in payment of an existing obligation. Later,
Alex found the goods to be defective. While in Celso’s
possession, the PN was stolen by Dennis who forged Celso’s
signature and discounted it with Edgar, a money lender who
did not make inquiries about the PN. Edgar indorsed the PN to
Felix, a holder in due course. When Felix demanded payment
of the PN from Alex, the latter refused to pay. Dennis could no
longer be located. What are the rights of Felix, if any, against
Alex, Benito, Celso and Edgar? Explain. Does Celso have any
right of action against Alex, Benito and Felix? Explain [1995
Bar Examinations].
46. A drew a check for P1,000.00 on B, the Bank payable to
the order of C and delivered the check to the latter for value. C
indorsed the check in blank and negotiated it to D, who lost it.
At D’s request, A ordered payment stopped by notifying B. The
stop payment order was overlooked and the check was paid to
E, who had taken the check, without actual knowledge of the
loss, in payment of merchandise sold to a stranger whom he
thought owned the check. D now sues the bank. Decide the
case with brief reasons [1979 Bar Examinations].
INCIDENTS
M. NEGOTIATION
47. Richard Clinton makes a promissory note payable to
bearer and deliverrs the same to Autora Page. The latter,
however, endorses it to X in this manner: “Payable to X,
Bar Questions in Negotiable Instrument
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Signed: Aurora Page”. Later, X, without endorsing the
promissory note, transfers and delivers the same to Napoleon.
The note is subsequently dishonored by Richard Clinton. May
Napoleon proceed against Richard Clinton for the note? [1998
Bar Examinations].
48. On November 3, as payment for goods received, A gave to
B his check drawn on PNB, Manila. B thereafter negotiated the
check to C. On November 10, C could not encash the check
because the Bangko Sentral had forbidden PNB to do
business on grounds of insolvency. Can C hold A liable on the
uncashed check? Can C hold B liable instead on the uncashed
check? Explain. If you were B, how would you negotiate the
check to negate future liability thereon? Explain [1987 Bar
Examinations].
N. DISHONOR
49. When is notice of dishonor not required to be given to the
drawer? [1996, Bar Examinations].
50. A issued a promissory note to B dated January 1, 2002, in
the following tenor: “I promise to pay to the order of B
P1,000.00 sixty days after date. (Sgd.) A”. The note was
subsequently negotiated with proper indorsement by B to C, C
to D, and D to E, the holder. When E presented the note for
payment to A, the latter refused to pay. E then gave a notice of
dishonor to C only. May E immediately proceed against B, C or
D? What should C do to protect his rights, if any, against A, B
and D? Explain [1984 Bar Examinations].
51. X draws a bill of exchange against Y in favor of W for
P1,000.00, requesting the drawee to pay on December 24,
1962. W indorses the instrument to P on September 1 and on
September 15 presents it for acceptance. The bill is
dishonored. P promptly sues W for payment. Will the case
prosper? Give reasons for your answer [1963 Bar
Examinations].