NEGOTIABLE INSTRUMENTS LAW

COURSE OUTLINE
1st Semester, AY 2018-2019
De La Salle University – College of Law

Prof. Monica L. Jimenez-Bigbig

A. INTRODUCTION
1. History of the NIL (Act No. 2031)
2. Negotiability in general
3. Kinds of negotiable instruments

Sec. 184, 126, 185

a. Promissory Note
b. Bill of Exchange
 Draft
 Trust receipt
 Letter of Credit
 Inland bills
Sec. 129
 Foreign bills
Sec.129
c. Check
 Crossed Check
Equitable Banking Corp. vs. Special Steel Products Inc., 672 SCRA
212 (2012)
 Cancelled check
 Manager’s or Cashier’s Check
Bataan Cigar and Cigarette Factory vs CA, 230 SCRA 643 (1994)
Equitable PCI Bank vs. Ong, 502 SCRA 119 (2006)
 Certified check
Sec. 187, 188, 189
 Stale check
Sec. 186

4. Parties and the nature of their liabilities

5. Functions of negotiable instruments

B. REQUISITES OF NEGOTIABILITY
Sec. 1, 184, 126

1. Written form & signature

Sec. 18, 19, 20, 21
HSBC vs. CIR, GR No. 166018 & 167728, June 4, 2014
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2. Unconditional order or promise to pay

Sec. 3
Jimenez vs. Bucoy, 103 Phil 40, February 28, 1958

3. Sum payable must be certain

Sec. 2
Nacar vs. Gallery Frames, 703 SCRA 439 (2013)

4. Payable in money
5. Certainty of time of payment

Sec. 4, 7, 11, 17 (c)

a. When payable on demand
b. Payable at a fixed date
c. Payable at a determinable future time
d. Effect of acceleration provisions
e. Provisions extending time of payment

6. Must be payable to order or to bearer

Salas vs. CA, 181 SCRA 296 (1990)

a. When instrument is payable to order

Sec. 8
b. When instrument is payable to bearer
Sec. 9
Consolidated Plywood vs. IFC Leasing, 149 SCRA 449 (1987)
PNB vs. Rodriguez, GR No. 170325, September 26, 2008

7. Drawee must be designated with certainty (for Bill of Exchange only)

Sec. 128, 130
8. Provisions not affecting negotiability
Sec. 5
9. Omissions not affecting negotiability
Sec. 6
10. Rules of construction
Sec. 17

C. ISSUANCE
1. Delivery
Sec. 191
DBP vs. Sima Wei, 219 SCRA 736, March 9, 1993

a. Incomplete but delivered instruments (Sec.14)

b. Incomplete and undelivered instruments (Sec. 15)
c. Complete but undelivered instruments (Sec. 16)

2. Signatures
Sec. 18, 19, 21

Solidbank vs. Mindanao Ferroalloy Corp., 464 SCRA 403 (2005)

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a. Forged Signature
Sec. 22, 23

BPI vs. Casa Montessori Internationale, 430 SCRA 261 (2004)

Gempesaw vs. CA, 218 SCRA 682 (1993)
Ilusorio vs. CA, 393 SCRA 89 (2002)

3. Material Alterations
Sec.125, 124
Philippine Clearing House Corporation CHOM No. 15-460
Metrobank vs. Cabilzo, 510 SCRA 259 (2006)

4. Consideration
Sec. 24, 25, 26, 27, 28,

Accommodation party
Sec. 29
Aglibot vs. Santia, 687 SCRA 283 (2012)
Travel-On Inc., 210 SCRA 351 (1992)

D. NEGOTIATION
1. Methods of Negotiation
Sec. 30

2. Negotiation vs. Assignment

3. Indorsement
Sec.31, 32

4. Kinds of Indorsement

a. Special – Sec 34
b. Blank – Sec 34
c. Restrictive – Sec 36, 37, 47
d. Qualified – Sec 38, 65
e. Conditional – Sec. 39
f. Joint – Sec.41
g. Irregular – Sec. 64

5. Warranties of an Indorser
Section 66

6. Presumptions as to Indorsement
Sec.45, 46
Rule 131, Sec. 3(f), Revised Rules of Court

7. Cancellation or Striking Out of Indorsements

Sec. 46
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8. Transfer without Indorsement

Sec. 49
BPI vs. CA, 512 SCRA 620 (2007)

9. Renegotiation
Sec. 50

E. HOLDER IN DUE COURSE

1. Who is a holder in due course

Sec 52, 54, 56
Hi-Cement Corp. vs Insular Bank of Asia and America, 534 SCRA 269 (2007)
Bank of the Philippines vs. Roxas, 536 SCRA 168 (2007)

2. Rights of a holder in due course

Sec. 51, 57, 58
“Shelter principle”
Sec. 58
Fossum vs. Hermanos, 44 Phil 713 (1923)

3. Personal defenses

a. Absence/ failure/ defect in consideration

Sec. 28
b. Insertion of wrong date
Sec 13
c. Incomplete, delivered instrument
Sec 14
d. Complete, undelivered instrument
Sec. 16
e. Fraud in Inducement
Sec. 55
6. Acquisition for an illegal consideration
Sec. 55

4. Real defenses

a. Alteration
Sec. 124
b. Incomplete, undelivered instrument
Sec. 15
c. Duress, amounting to forgery
d. Fraud in factum or esse contractus
e. Minority
Sec. 22
f. Lack of Spouse’s Consent
Art. 124, Family Code
g. Insanity
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h. Ultra vires acts of corporations

Crisologo-Jose vs. CA, 177 SCRA 594 (1989)
i. Forgery
Sec. 23

F. LIABILITY OF PARTIES

1. Liability of primary parties

Sec. 192

a. Liability of maker
Sec. 60

b. Liability of Acceptor
Sec. 62
FEBTC vs. Gold Palace Jewellery Co. GR No. 168274, August 20, 2008

2. Liability of secondary parties

Sec. 192

a. Liability of drawer
Sec. 61

b. Liability of Indorser and one negotiating by delivery

Sec. 65

c. Liability of a general or unqualified indorser

Sec. 66, 67, 63, 40
People vs. Maniego, 148 SCRA 30 (1987)
Tuazon vs. Ramos, 463 SCRA 408 (2005)

d. Liability of restrictive indorser

e. Order of liability among indorsers
Sec. 68
Gonzales, vs. RCBC, 508 SCRA 459 (2006)

G. PRESENTMENT FOR ACCEPTANCE

1. When necessary; effect of non-presentment
Sec. 143, 144, 193
2. How and when made
Sec. 145 and 146
3. When excused
Sec. 148, 147
4. Dishonor and its effects
Sec. 149, 150, 151, 89, 117
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H. PRESENTMENT FOR PAYMENT

1. When presentment necessary; effect of non-presentment

Sec. 70

2. When presentment not necessary

a. As to drawer
Sec. 79

b. As to indorser
Sec. 80

c. As to all secondary parties

Sec. 82, 151, 111

3. Date and time of presentment of instrument bearing fixed maturity

Secs. 71, 81, 85, 86, 194

4. Date of presentment of demand notes

Sec. 71

5. Date of presentment of demand bills of exchange

Sec. 71

6. Date of presentment of checks

Sec. 185 and 186
Arceo Jr. vs People, 495 SCRA 204 (2006)

7. When delay in presentment excused

Sec. 81

8. Manner of presentment
Sec. 74, 72

9. Place of Presentment
Sec. 73

10. To whom presentment must be made

Sec. 72(d), 76, 77, 78

I. DISHONOR

1. What constitutes dishonor by non-payment

Sec. 83

2. Effect of dishonor by non-payment

Sec. 84
Tuazon vs. Heirs of Ramos, 463 SCRA 408 (2005)
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3. Notice of dishonor

a. When necessary
Sec. 89

b. Form and contents of notice

Sec. 95 and 96
Batas Pambansa Blg. 22

c. Time within which notice must be given

Sec. 102, 103, 104, 105, 106, 107, 113

d. Place where notice must be given

Sec. 108

e. By whom notice must be given

Sec. 90 and 91

f. To whom notice must be given

(1) If given by agent

Sec. 94

(2) To whom in general

Sec. 97

(3) If party is dead

Sec. 98

(4) To partners
Sec. 99

(5) To joint parties

Sec. 100

(6) To bankrupt
Sec. 101

g. In whose favor notice operates

Sec. 92 and 93

h. When rule requiring notice not applied

Sec. 112

i. When notice of non-acceptance already given

Sec. 116

j. Waiver
Sec. 109 and 110
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k. When not necessary to charge drawer

Sec. 114
Lopez vs. People, 555 SCRA 525 (2008)

l. When not necessary to charge indorser

Sec. 115

m. Legal effect of failure to give notice

Sec. 89 and 117

J. PROTEST
1. Definition and Method
Allied Bank v. CA (2006)
2. When necessary
Sec. 152, 129, 157
3. Form and contents of certificate of protest
Sec. 153
4. By whom made
Sec. 154
5. Time and place of protest
Sec. 155 and 156
6. Protest for better security
Sec. 158
7. When delay is excused and protest is dispensed with
Sec. 159 and 112
8.. Waiver of protest
Sec. 111
9. Protest in case of loss of instrument
Sec. 160

K. ACCEPTANCE FOR HONOR

Sec. 160 and 131

L. PAYMENT FOR HONOR

Sec. 171

M. BILLS IN SET
Sec. 178, 179, 180, 181, 182, 183

N. DISCHARGE
1. Discharge of the Instrument
Sec. 119

(a) By payment in due course

Sec 51 and 88
(b) By intentional cancellation
Sec. 119 (c) and Sec. 123
(c) By any other act which will discharge a contract
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Papa v. Valencia, G.R. No. 105188. January 23, 1998

Salazar vs. JY Brotherrs Marketing Corporation, GR No. 171998,
October 20, 2010

(d) By reacquisition of principal debtor in his own right

Sec. 119 (e)
(e) By renunciation of holder
Sec. 122
(f) Material alteration
Sec. 124 and 125

2. Discharge of secondary parties

Sec. 120

(a) By discharge of instrument

(b) By intentional cancellation of signature
Sec. 123 and 48
(c) By discharge of prior party
(d) By valid tender of payment by prior party
(e) By release of principal debtor
(f) By extension of time of payment
Sec. 120 (f)
(g) By renunciation
Sec. 122
(h) By taking a qualified acceptance
Sec. 142
(i) By failure to make due presentment
Sec. 70 and 144
(j) By failure to give notice of dishonor
Sec. 89
Far East Realty Investment vs. CA, 166 SCRA 256 (1988)

(k) Certificate of check at instance of holder

Sec. 188