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UY | DELAPENA |
A: That's what the law says. It is payable on or at a fixed period after the occurrence of a
specified event which is certain to happen. Ako nala sturya para ako nala gradohan.
A: If I put here 10 days before the death of Y
S: no sir. It is not negotiable. Because 10 days before the death of Y is undeterminable.
A: of course. You cannot determine when is the death. So this is not considered a
determinable future time. And because the period is not certain, it will render the
instrument non-negotiable. How about this: I promise to pay P5,000 to X or order
S: Negotiable sir, payable on demand.
A: because there is no other time within which the person who ought to pay on the
instrument is supposed to pay. It's only on June 30, 2016. There is a reason why it says on
a fixed or determinable future time. It will be fixed if there is no other period within which
the person obliged to pay can pay. But if it's given an option then maybe it's a
determinable future time.
A: First example of determinable future time: Payable on a fixed period after date or sight
A: It is upon the demand of the holder of the instrument. So anytime, it can be considered
payable. Now, what is the fourth requirement.
A: It says fixed period after date. Yes, you give the date if it is after but you also have to
speak what is that fixed period after that date. Otherwise it will never mature. Diba if it just
says after June 30, 2016. It's now 2020. It will still not be demandable. Now how about
after sight?
S: The instrument is payable to order where it is drawn payable to the order of a specified
person or to him or his order. It may be drawn payable to the order of:
(a) A payee who is not maker, drawer, or drawee; or
(b) The drawer or maker; or
(c) The drawee; or
(d) Two or more payees jointly; or
(e) One or some of several payees; or
(f) The holder of an office for the time being.
Where the instrument is payable to order, the payee must be named or otherwise
indicated therein with reasonable certainty.
A: third example. On or at a fixed period after the occurrence of a specified event which is
certain to happen, though the time of happening be uncertain.
A: Negotiable?
S: drawn payable to him or his order. I promise to pay P10,000 to P or his order.
UY | DELAPENA |
A: I is the drawer, whereas.... that is correct. R is the drawer. Can you not order yourself
to pay yourself? Zzzzzz
S: that is correct sir. In that case, I am the drawer at the same time I am also the payee
and at the same time I am the drawee.
A: So in other words you are everyone? All the parties in the instrument is you. Ikaw na
gyud tanan. You're the drawee, you're the drawer and you're also the payee. But in this
case there is a second requirement though before you can negotiate this instrument. Aside
from your signature, you will also have to sign at the back as the first indorser. Because
you are everyone in this instrument. But then going back to a simpler example:
S: I promise to pay to myself or order P10,000
sgn. M(maker)
A: this is correct. The maker is M, the payee is M as well, and also his order. Because it
says it is payable to the order of the payee who is the maker or the drawer. To the order of
the drawee?
S: X pay to the order of yourself P10,000
sgn. R(drawer)
A: this is correct. This is an example of an instrument payable to the order of a drawee
who happens to be the payee as well. So X will become the payee. The drawer is ordering
X to pay himself. You can make your life easier by saying:
To X: Pay to the order of X so you won't get confused. So how about if it is drawn
payable to two or more payees jointly:
S: To X:
Pay to the order of P and A 10,000.
sgn. R
A: when it is joint, that means that you have separate interest at the instrument. You can
actually say: pay to the order of P 5,000 and A 5,000. that would still be correct.
A: How about one or to order of several payees?
A: this is an example of an instrument payable to a payee, who is not the drawer. Who is
the drawer? R. Who is the payee? P. Who is the drawee? X in this case. This is already an
example of an instrument drawn payable to a person who is not the drawee. How about on
letter B?
S: drawn payable to the order of the drawer or maker
i order to pay to myself or order P10,000
sgn. R (drawer)
UY | DELAPENA |
A: That is correct. The first example Payable to bearer P, the word bearer there was just
used to describe P. So it is still payable to a specific person, the bearer, which happens to
be P alone. Bearer was used to describe P and not other persons who may hold on to that
instrument. This one, on the other hand, says pay to bearer or to a specified person then
that means whoever is holding the instrument he could be considered as the payee. It
could still be negotiated then. Third example?
S: The third example is when it is payable to the order of a fictitious or non-existing person
or such fashion know to the person making it. Example. Pay to Superman or order
P10,000.
A: What if the maker here is part of a secret society who knows that Superman does not
really exist. Will it change your answer?
S: No, sir. It will still be the same.
A: However, if the maker knows that Superman is a real person, would that change your
answer?
S: Yes, sir since the maker knows that he is a real person then Superman is capable of
indorsing the instrument to another. The maker then did not intend the instrument to be
payable to the bearer. It is an order instrument.
A: If the maker knows that the person is not fictitious, yes it may not affect the negotiability
of the instrument, it will just change its nature. Instead of a bearer instrument it will now
become an order instrument because there is still a word of negotiability which is order.
Still not payable to a specified person. Fourth Example?
S: When the name of the payee does not purport to be the name of any person. Example
is Pay to cash.
A: Ms. Do you agree?
S: Pay to cash P10,000.
A: You have to indicate a sum certain in money for it to be negotiable. If you put there Pay
to the order of Bill Gates P10,000.
S: If I know that Bill Gates is a person that exists then it would become an order
instrument. So if I dont know that Bill Gates is not a real person then it would become an
order instrument.
S: Since there is already bearer or P then it does not pertain to a specific person unlike
the example of Payable to the bearer P it is just describing P as the specific bearer.
A: That is correct. So even if the person does exist and you dont know that the person
actually exists, it could still be considered as a bearer instrument. So if you dont really
UY | DELAPENA |
A: Originally it is an order instrument in all its good form. When I say in all its good form
because there are order instruments which are in fact bearer instruments due to certain
defects in certain matters. So at first it was an order instrument turned Bearer instrument.
Once a bearer instrument it will forever be considered as a bearer instrument.
S: Sir, what if it is Payable to the order of Black Mamba and the maker knows that he is a
real person but the payee doesnt would that make it a bearer instrument?
A:
S:
A:
S:
A:
Negotiable or not?
A: it would not depend on whether or not if the payee knows who Black Mamba is but
would depend on the intention of the maker.
S: Sir, the book said that To bearer or P is not a negotiable instrument according to some
authors?
A: That is their position. My Position is that is still a bearer instrument. How could It be any
different from a specified person or bearer? I do not really see the difference.
BREAK
A: One of the major differences of an order and bearer instruments is that the latter can be
negotiated by mere delivery whereas the former can only be negotiated by indorsement
plus delivery. If we are to illustrate the last example of Sec. 9 how will it be done?
S: At the back of the instrument.
Sgd. X
A: This would already become a bearer instrument?
S: Yes, sir. When the payee indorses the instrument without specifying to the order of
anyone then it is an indorsement in blank.
Yes, Sir, I think it is negotiable because the drawee was named or indicated in
the instrument
(Atty. calls another student)
S:
A:
S:
I think sir it will still be considered negotiable although the drawee is a fictitous or
non existing as long as the fact is known, however, if it will not comply with the
last requirement, when the drawee must be named....
A:
S:
It's negotiable sir but it is not an order instrument. it's a bearer intrument.
A:
S:
A:
S:
A:
A:
Let's proceed to the next section which is a little bit difficult. But then again, these
words as usually used in our examples need not be the terms used in a
UY | DELAPENA |
FACTS: In this case, Security Bank and Trust company issued 280 certificates of
time deposits in favor of Angel de la Cruz now, what Angel de la Cruz did was to
use these certificates of time deposits as payment for the purchase of fuel
products in favor of Caltex. However Angel de la Cruz went to the bank and said
that he lost these certificates of time deposits and so what the bank did was that
they reissued another set of certificates of time deposits in favor of Angel de la
Cruz. He then loaned 875,000 from the bank and assigned his rights to the time
deposit and the bank pre terminate them and used to set up the loan obligation of
Angel de la Cruz. Mr. Aranas of Caltex went to the branch and tried to verified the
certificates of time deposits and wanted to pre terminate the same but Security
bank and trust company rejected such.
ISSUE: The issue here is whether those certificates of time deposits were
considered to be a negotiable instrrument or not.
HELD: The court said that the certificates of time deposits were negotiable
instruments because from the wording of their arrangement (bet. security bank
and Angel de la Cruz) the word that they used there is bearer instead of
depositor. So the court said that the accepted rule...
A:
How was it expressly provided for in the case? The negotiable instrument, how
was it worded in the case itself. (student wrote how it was worded in the board)
So, this is how it was worded in the instrument in the certificate of time deposit
issued by the security bank in favor of?
S:
A:
S:
So, in other words, He actually assigned it so that's why in that case the issue
was whether the assignment has the effect of negotiation but that was how it was
termed, He ASSIGNED his right on this instrument to Caltex and then claimed to
the bank that he actually lost it and so the bank reissued. So there was intent on
the part of Angel but that is not our concern. Our concern is whether this
instrument as it is worded is considered negotiable and what did the Supreme
Court say? How are you supposed to determine whether an instrument is
negotiable or not?
From the Ruling of the Supreme Court, it stated that ... "On this score, the
accepted rule is that the negotiability or non-negotiability of an instrument is
determined from the writing, that is, from the face of the instrument itself. In
the construction of a bill or note, the intention of the parties is to control, if it can
be legally ascertained. While the writing may be read in the light of surrounding
circumstances in order to more perfectly understand the intent and meaning of
the parties, yet as they have constituted the writing to be the only outward and
visible expression of their meaning, no other words are to be added to it or
substituted in its stead. The duty of the court in such case is to ascertain, not
what the parties may have secretly intended as contradistinguished from what
their words express, but what is the meaning of the words they have used. What
the parties meant must be determined by what they said. "
A:
In shorter terms?
S:
What is controlling sir is not what the parties intended sir but what is written in the
instrument.
A:
So, you look at the face of the instrument and check whether it has complied with
the requirements of the Negotiable Instruments Law, that is why it is really
important that you memorize what are the requirements of a negotiable
instrument for you to determine whether it is negotiable or not. So, In the exam
you will not be able to see the intention of the parties, what you can see is just
the wordings of the instrument and you have to determine whether it is negotiable
or not. So based on these wordings as written on the face of the instrument, is it
a negotiable instrument?
S:
Yes sir because it does not specify that it was only to Mr. Angel de la Cruz but is
to a bearer.
A:
What are the basis cited by the Supreme Court as indicative of it being
negotiable?
UY | DELAPENA |
S:
One sir is that instead of using a depositor, they used the word bearer. As a
result it can be transferred in favor of another person or it can be negotiated to
another person.
A:
What else?
S:
S:
A:
So it's the only word bearer, which led the Supreme Court to say that this is a
negotiable instrument? How about you if you were the Supreme Court, how will
you defend this as a negotiable?
S:
I think sir, aside from the fact that it follows the requirement, it did not specify a
specific person sir.
A:
S:
FACTS: Enrique Montinola sought to purchase from Manila Post Office ten
money orders of P200.00 each payable to E.P. Montinola. Montinola offered to
pay for them with a private check, which were not generally accepted in payment
of money orders, the teller advised him to see the Chief of the Money Order
Division, but instead of doing so, Montinola left the building with his own check
and the ten money orders without the knowledge of the teller
A:
Based on the practice, Postal Office do not allow check payments. So in other
words, what did Montinola do?
S:
He stole them sir, so upon knowledge of the unpaid money orders, an urgent
message was sent to all postmasters which was served to all banks instructing
them not to pay anyone of the money orders if presented for payment. This was
also received by the Bank of America. The said money orders were then
deposited with the Bank of America and one day thereafter the latter cleared it
with the Bureau of posts and received from the latter its face value of P200.00
A:
but it says it is restrictive, what does that mean? It places a condition on the order
or the promise to pay that is why it is not considered negotiable. so the First
is it is not used in commercial transactions because the Philippine Postal
office is not engage in commercial transaction. Second, the instrument are
restrictive in terms of conditions and so it renders the order or promise
conditional. So it fails to comply with the second requirement of the Negotiable
Instruments Law.
(calls another student)
A:
S:
FACTS: Eduardo Gomez opened an account with Golden Savings and deposited
over a period of two months 38 treasury warrants but they do not have a clearing
device, all these warrants were subsequently indorsed by Gloria Castillo as
Cashier of Golden Bank and they were then deposited to Metropolitan bank. She
always check whether the clearing was already done and due to that Metropolitan
bank was exasperated over Gloria's repeated inquiries and so they told her that
the warrants were already cleared. Subsequently, the Golden bank released the
money to Gomez in payment of the treasury warrant.
A:
S:
So now. Metropolitan Bank informed Golden Savings that 32 of the warrants had
been dishonored by the Bureau of Treasury and demanded the refund by Golden
Savings of the amount it had previously withdrawn, to make up the deficit of the
account. The demand was rejected. So this case was filed
So in other words the Bank of America is now claiming from the Philippine postal
office on the postal money order which they issued. If you can see there is
transfer now, from the Philippine postal office to the hands of Montinola, from
Montinola it went to the Philippine Education something, and then it went to the
Bank of America, from Bank of America it is now demanding payment from the
Philippine postal office. So in other words there seems to be assemblance of
negotiation of the instrument and so the issue is the case is:
ISSUE: Whether or not the postal money order are considered negotiable
intruments?
A:
S:
The Supreme Court said that those postal money orders are not negotiable
instruments.
A:
S:
HELD:
FIRST: It is not disputed that our postal statutes were patterned after statutes in
force in the US. For this reason ours are generally construed in accordance with
the construction given in the US. The reason behind this rule being that, in
establishing and operating a postal money order system, the government
is not engaging in commercial transactions but merely exercises a
governmental power for the public benefit.
A:
UY | DELAPENA |
So that is why it is important that when you define negotiable instruments law,
you must say that IT IS USED IN COMMERCIAL TRANSACTION because this
case actually says, make it as a basis that the instrument, postal money order, is
not a negotiable instrument because it is not used in the commercial transaction.
and then the second reason is?
S:
SECOND: Some of the restrictions imposed upon money orders by postal laws
and regulations are inconsistent with the character of negotiable instruments.
A:
In other words?
S:
A:
S:
HELD: The Supreme Court ruled in favor of Savings Bank because Metropolitan
bank were clearly negligent. There was also a discussion there on the treasury
warrant whether it was a negotiable instrument or not. The Supreme Court ruled
that they were not negotiable.
A:
Why are they not negotiable? there are other issues in this case such as
diligence required in a bank, there was even an issue on fraud because how did
these treasury warrants went to the hands of Gomez when they were not
ligitimate treasury warrants but then the only issue relevant to us is just:
ISSUE: Whether or not treasury warrants are negotiable?
S:
The treasury warrants are not negotiable because clearly stamped on their face
is the word "NON-NEGOTIABLE". Moreover it is indicated that they are payable
from a particular fund, to wit, FUND 501
S:
A:
Again, if it fails to comply with the second requirement that the promise or order
be UNCONDITIONAL and so because of that treasury warrants are considered
"non-negotiable" but take note NOT ALL treasury warrants are considered non-
UY | DELAPENA |