JOSE RIZAL UNIVERSITY

College of Law
LAW ON NEGOTIABLE INSTRUMENTS

Atty. L. P. Fainza

COURSE SYLLABUS

COURSE TITLE : NEGOTIABLE INSTRUMENTS LAW

COURSE CODE : LS 2108
CREDIT UNITS : 3 units
COURSE DESCRIPTION: The course is a study of the statutory provisions governing
negotiable instruments which is mainly the Negotiable Instruments
Law, as well as the applicable provisions of the Code of
Commerce.

PLACEMENT : Second Year, 1st Semester

I – INTRODUCTION
- Characteristics or features of negotiable instrument;
- Functions of a negotiable instrument;
- Common forms of negotiable instrument;
- Original parties in negotiable instrument;
- Special types of promissory note;
- Special types of bill of exchange;
- Distinctions between promissory note and bill of exchange;
- Negotiation distinguished from assignment

CASES:
Phil. Educ. Co., Inc. vs. Soriano, 39 SCRA 587 (G.R. No. L-22405, 30 June 1971)
Tibajia, Jr. vs. CA, 223 SCRA 163
Philippine Airlines vs. CA, 181 SCRA 557
BPI vs. Sps. Royeca, G.R. No. 176664, 21 July 2008
Bognot vs. RRI Lending Corporation, G.R. No. 180144, 24 September 2014

II – REQUISITES OF NEGOTIABLE INSTRUMENT (Sec. 1)

- It must be in writing and signed by the maker or drawer
o using a trade or assume name (Sec. 18)
o duly authorized agent signs for his principal (Sec. 19)
o forger (Sec. 23)
o holder who negotiates an instrument by mere delivery (Sec. 65)

- It must contain an unconditional promise or order to pay a sum certain in

money
o When promise/order is considered unconditional (Sec. 3)
o What constitutes certainty as to sum (Sec. 2)

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 - It must be payable on demand or on a fixed determinable future time
o What constitutes determinable future time (Sec. 4)
o When instrument is payable on demand (Sec. 7)

- It must be payable to order or to bearer

o When instrument is payable to order (Sec. 8)
o When instrument is payable to bearer (Sec. 9)

- If the instrument is address to a drawee, he must be named or otherwise

indicated therein with reasonable certainty
o Bill addressed to more than one drawee (Sec. 128)

CASES:
Metropolitan Bank & Trust Company vs. CA, 194 SCRA 169
Caltex Phils. vs. CA, 212 SCRA 448
Ang Tek Lian vs. CA, 87 Phil. 383
PNB vs. Rodriguez, G.R. No. 170325, September 26, 2008
Salas vs. CA, 181 SCRA 296
Equitable Banking Corp. vs. IAC, G.R. No. 74451, May 25, 1988
Traders Royal bank vs. CA, 269 SCRA 15, G.R No. 93397, March 3, 1997
Rivera vs. Sps. Chua, G.R. No. 184458, January 14, 2015

III - A. OMISSIONS NOT AFFECTING NEGOTIABILITY (Sec. 6)

- It is not dated;
o Presumption as to date (Sec. 11)
o Ante-dated and post-dated (Sec. 12)
o When date may be inserted (Sec. 13)
- Does not specify the value given; or
- Does not specify the place where it is drawn or the place where it is
payable; or
- Bears a seal; or
- Designates a particular kind of current money in which payment is to be
made.

CASE:
San Miguel Corporation vs. Puzon, Jr., G.R. No. 167567, September 22, 2010

B. ADDITIONAL PROVISIONS NOT AFFECTING

NEGOTIABILITY (Sec. 5)

CASE: 
Philippine National Bank vs. Manila Oil Refining & By- Products Company,
43 Phil 445

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IV - CONSTRUCTION WHERE INSTRUMENT IS AMBIGUOUS (Sec. 17)

CASES:
Republic Planters Bank vs. CA, 216 SCRA 738
Sps. Evangelista vs. Mercater Finance Corp. et.al., G.R. No. 148864, August 21,
2003
Ilano vs. Hon. Espanol, G.R. No. 161756, 16 December 2005

V - CONSIDERATION

- Concept of consideration;
- Presumptions of consideration (Sec. 24);
- What constitutes value (Sec. 25);
- What constitutes holder for value (Sec. 26);
- When lien on instrument constitutes holder for value (Sec. 27);
- Effect of want of consideration (Sec. 28);
- Concept of accommodation party;
- Liability of accommodation party (Sec. 29);
- Effect of payment of the instrument by:
o Party accommodated
o Accommodation party

CASES:
Ong vs. People, 346 SCRA 117
Yang vs. CA, 409 SCRA 159
Garcia vs. Llamas, 417 SCRA 292
Caneda vs. CA, 181 SCRA 762
Ang vs. Associated Bank, G.R. No. 146511, September 5, 2007
Lim vs. Saban, G.R. No. 163720, December 16, 2004

VI - NEGOTIATION
- Modes of transfer of negotiable instrument;
- What constitutes negotiation (Sec. 30);

- Where and how is indorsement made (Sec. 31);

- Indorsement must be of entire instrument (Sec. 32)
- Kinds of indorsement
o Special indorsement (Sec. 34)
o Blank indorsement (Sec. 35)
o Restrictive indorsement (Sec. 36)
 Effects of restrictive indorsement (Sec. 37)
o Qualified indorsement (Sec. 38)
o Conditional indorsement (Sec. 39)

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 - Indorsement of instrument payable to bearer (Sec. 40);
- Indorsements where payable to two or more persons (Sec. 41);
- Effect of instrument drawn or indorsed to a person as cashier (Sec. 42);
- Indorsement where name is misspelled (Sec. 43);
- Indorsement in representative capacity (Sec. 44);
- Time of indorsement (Sec. 45);
- Striking out indorsement (Sec. 48);
- Effect of transfer without indorsement (Sec. 49);
- When prior party may negotiate instrument (Sec. 50).

CASES:
Sesbreño vs. CA, 222 SCRA 466
ConsolidatedPlywood Inc. vs. IFC Leasing 149 SCRA 448
Caltex vs. CA, 212 SCRA 448
Dela Victoria vs. Hon. Burgos, G.R. No.

VII - RIGHTS OF THE HOLDER

- Concept of holder (Sec. 191);
- What constitutes a holder in due course (Sec. 52);
- When person not deemed holder in due course (Sec. 53);
- When title to instrument is defective (Sec. 55);
- Rights of a holder in due course (Sec. 57);
- When subject to original defenses (Sec. 58);

CASES:
State Investment House vs. IAC, G.R. No. 72764, July 13, 1989
Yang vs. CA, G.R. No. 138074, August 15, 2003
Dino vs. Loot, G.R. No. 170912, April 19, 2010
Patrimonio vs. Gutierrez and Marasigan, G.R. No. 187769, June 4, 2014

VIII – LIABILITIES OF PARTIES

- Parties primarily liable on instrument
- Parties secondarily liable
- Liability of the maker (Sec. 60)
- Liability of the drawer (Sec. 61)
- Liability of the acceptor (Sec. 62)
- Liability of irregular indorser (Sec. 64)
- Warranty where negotiation by delivery (Sec. 65)
- Liabilities of a general indorser (Sec. 66)
- Liability of an agent or broker (Sec. 69)

CASES:
Philippine National Bank vs. Picornell, et.al., 46 Phil 716
Garcia vs. LLamas, G.R. No. 154127, December 8, 2003
Crisologo-Jose vs. CA, G.R. No. 80599, September 15, 1989

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Sadaya vs, Sevilla, 19 SCRA 924
Travel-On vs. CA, 210 SCRA 352
Agro-Conglomerates, Inc. vs. CA, 348 SCRA 350
Gonzales vs. RCBC, G.R. No. 156294, November 29, 2006
Ang vs. Associated Bank, G.R. No. 146511, September 5, 2007
Far East vs. Gold Palace Jewelry, G.R. No. 168274, August 20, 2008

IX – DEFENSES
- Real and Personal Defenses, distinguished
- Real Defenses
o Incomplete and undelivered (Sec. 15)
o Forgery (Sec. 23)
o Minority (Sec. 22)
o Material Alteration (Sec. 124)

- Personal Defenses
o ante-dating or post-dating (Sec. 12, NIL)
o insertion of wrong date (Sec. 13, NIL)
o filling-up blanks beyond authority (Sec. 14, NIL) 
o want of delivery of a complete instrument (Sec. 16, NIL)
o absence or failure of consideration (Sec. 28, NIL)
o simple fraud, duress, intimidation, force or fear, illegality of
consideration, breach of faith (Sec. 55, 56 & 57, NIL)

CASES:
Samsung Construction Com. vs. FEBTC, 436 SCRA 402
Bank of PI vs. Casa Montessori, 430 SCRA 261
Philippine National Bank vs. CA, 256 SCRA 491
Salas vs. CA, G.R. No. 76788, January 22, 1990
International Corporate Bank vs. CA, G.R. No. 129910, September 5, 2006
Jai-Alai vs. BPI, 66 SCRA 29
Republic vs. Ebrada, G.R. No. L-40796, July 31, 1975
Philippine National Bank vs. Quimpo, G.R. No. L-53194, March 14, 1988
Gempesaw vs. CA, G.R. No. 92244, February 9, 1993
Philippine Commercial International Bank vs. CA, 350 SCRA 446
MWSS vs. CA, 143 SCRA 20
Ilusorio vs CA, 393 SCRA 89
Samsung Construction vs. Far East Bank, G.R. No. 129015, August 13, 2004
Metrobank vs. Cabilzo, G.R. No. 154469, December 6, 2006
Bank of America vs. Philippine Racing Club, G.R. No.150228, July 20, 2009
Patrimonio vs. Gutierrez and Marasigan, G.R. No. 187769, June 4, 2014

X - PRESENTMENT FOR PAYMENT (Sections 70 to 88)

- Concept of presentment for payment
- Requisites for sufficiency (Sec. 72, NIL)
o Date of presentment (Sec. 71, NIL)

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 o Rule in determining maturity date (Sec. 85, NIL)
o Rule in computing time (Sec. 86, NIL)
o Rule if payable at a bank (Sec. 75, NIL)
- Place of presentment (Sec. 73, NIL)
o Rule if payable at a special place (Sec. 70, NIL)
- Presentment to the party primarily liable
o How presentment made (Sec. 74, NIL)
o Rule in case party primarily liable is already dead (Sec. 76, NIL)
- Presentment to partners (Sec. 77, NIL)
- Presentment to joint debtors (Sec. 78, NIL)
- Instances where presentment is executed (Sec. 79 & 82, NIL)
- When delay in presentment excused (Sec. 81, NIL)

CASES:
Far East Realty Development vs. CA, G.R. No. L-36549, October 5, 1988
The International Corporate Bank vs. Sps Gueco, G.R. No. 141968, February 12,
2001

XI - NOTICE OF DISHONOR (Sections 89 to 118)

- Concept of notice of dishonor;
- Purpose of notice of dishonor;
- Grounds for the giving of notice of dishonor;
- Effect of failure to give notice;
- Requisites of notice of dishonor;
o By whom notice is given
o How notice is given
o To whom notice is given
o When notice must be given
o Where notice must be sent

CASES:
Great Asian Sales Center Corp vs. CA, 381 SCRA 557
Associated Bank vs. Tan, 446 SCRA 282
Nyco Sales Corp. vs. BA Finance Corp., 200 SCRA 637
Far East Realty Investment, Inc. vs. CA, 166 SCRA 256
Wong vs. CA, G.R. No. 117857, February 2, 2001
International Corporate Bank vs. Sps. Gueco, G.R. No. 141968, February 12, 2001
Far East Realty vs. CA, G.R. No. L-36549, October 5, 1988
State Investment House vs. CA, 217 SCRA 32
Asia Banking Corporation vs. Javier, 44 Phil 777
Nyco Sales Corporation vs. BA Finance Corporation, 200 SCRA 637
Arceo, jr. vs. People of the Philippines, G.R. No. 142641, July 17, 2006
Allied Banking vs. CA, G.R. No. 125851, July 11, 2006

XII - DISCHARGE OF NEGOTIABLE INSTRUMENTS (Sec. 119)

- By payment in due course by or on behalf of the principal debtor;

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 - By payment in due course by the party accommodated, where the instrument
was made or accepted for his accommodation;
- By the intentional cancellation of the instrument by the holder;
- By any other act which discharges a simple contract for the payment of
money;
- When the principal debtor becomes the holder of the instrument at or after
maturity in his own;

PARTIES SECONDARILY LIABLE ARE DISCHARGED (Sec. 120)

- By any act which discharges the instrument;
- By the intentional cancellation of his signature by the holder;
- By the discharge of a prior party;
- By a valid tender of payment of a prior party;
- By release of the principal debtor, unless the holder’s right of recourse
against the parties secondarily liable is reserved;
- By any agreement binding upon the holder to extend the time of payment.

XIII. CHECKS
- Defined (Sec. 185, NIL)
- Distinguished from draft
- Relationship between drawer, drawee and payee
- Kinds of check
o Cashier’s and manager’s check (See BSP Circulars 259, series of
2000 & 291, series of 2001)
o Certified check (Sec. 187-189, NIL)
o Crossed check (Art. 541, Code of Commerce)
 Effects of crossing check
o Memorandum and traveller’s check
- When required to be presented for payment (Sec. 185, NIL)
- Effect of death of drawer
- Pertinent Philippine Clearing House Corporation rules

CASES:
New Pacific Timber vs. Hon. Seneris, G.R. No. L-41764, December 19, 1980;
PNB vs.National City Bank of New York, 63 Phil 711; 
Bataan Cigar vs. CA, 230S C R A   6 4 8;  
Stelco Marketing Corporation vs. CA, G.R. No. 96160, June 17, 1992
S t a t e I n v e s t m e n t H o u s e v s . C A , 1 7 5 S C R A 3 1 1;
P a p a v s . A . U . V al e n c i a , 2 8 4 SCRA 643; 
Villanueva vs. Nite, G.R. No. 148211, July 25, 2006; 
EquitableP CI v s . O n g , G . R . N o . 1 5 6 2 0 7 , S e p t e m b e r 1 5 , 2 0 0 6 ;
S e c u r i t y B a n k & T r u s t C o m p a n y v s . RCBC, G.R. Nos. 170984 & 170987,
January 30, 2009

References:
1. Notes and Cases on Banking and Negotiable Instruments Law

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 Author: Timoteo B. Aquino

2. Negotiable Instruments Law

Author: Dean Antonio H. Abad, Jr.

3. The Law on Negotiable Instruments

Author: Hector S. De Leon