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Negotiable Instruments Law (Atty.

Amago Discussion) 1
404 (A.Y. 2018-2019)
October 9, 2018 the authenticity of the instrument (such as erasures,
superimpositions)
Sec. 51. Right of holder to sue; payment. - The holder of a
negotiable instrument may to sue thereon in his own name; Complete and Regular are two different things.
and payment to him in due course discharges the
instrument. What if the there is no tampering or alteration in the
instrument but it was folded, is it still complete and
Sec. 52. What constitutes a holder in due course. - A holder regular (asked in 403)? Yes, it is still complete and
in due course is a holder who has taken the instrument regular. It is when there are alterations or
under the following conditions: superimpositions that the NI is not considered regular.
(a) That it is complete and regular upon its face;
(b) That he became the holder of it before it was 6. What is it mean that an instrument is overdue? You
overdue, and without notice that it has been look at the date of maturity of the instrument
previously dishonored, if such was the fact;
(c) That he took it in good faith and for value; A. If the Date of Maturity is provided for (calendar
(d) That at the time it was negotiated to him, he had no date given)—instrument is overdue AFTER such
notice of any infirmity in the instrument or defect in date
the title of the person negotiating it.
B. If Payable on an occurrence certain to
Sec. 53. When person not deemed holder in due course. - happen—instrument is overdue AFTER such date
Where an instrument payable on demand is negotiated on when it happens
an unreasonable length of time after its issue, the holder is
not deemed a holder in due course. C. If Payable on Demand— the date of maturity is the
date of presentment. Distinguish first between the
1. What are the rights of a holder? kind of NI:
(1) Right to receive payment for the instrument;
(2) Right to sue in his own name. If such payment is (1) If the instrument is a promissory note, it is
done in due course, discharges the instrument. deemed overdue after the lapse of a reasonable
(3) Right to further negotiate or transfer your right to time from its date of issuance.
the instrument if the indorsement allows you to do
so (2) If the instrument is a BOE, it is deemed overdue
after the lapse of a reasonable time from the date
2. Why do they have to provide there that you can sue of negotiation.
in your own name? You won’t be made dependent on
prior parties to enforce your right to receive payment. There is a distinction as to the date because in a
There are a lot of prior parties to the instrument and it is BOE, you would not know yet the person
not a requirement to go after all of them or demand from primarily liable until someone goes to the person
them just so you can sue the person primarily liable. liable to present it for acceptance. It is usually the
person who last held the instrument that goes to
3. What is the third right? Right to further negotiate or the person primarily liable to accept and pay the
transfer your right to the instrument if the indorsement instrument. In a BOE, the instrument has to first
allows you to do so. be accepted before it can be presented for
payment. In a PN, at the time it is issued, you
4. There is a need to distinguish whether the holder is would know who is primarily liable already.
a due course or not. Who is a holder in due course?
Sec. 52, NIL (COFI) What is “reasonable time” (asked in 403)? It is a
question of fact. It depends on the surrounding
One who has taken the instrument in the following circumstances taking into consideration the “nature of
circumstances (ALL MUST CONCUR): the instrument, the usage of trade or business with
respect to such instruments and the facts of the
(1) That it is complete and regular upon its face particular case” (see Sec 193). You must know what
(2) That he became the holder of it before it was constitutes ‘reasonable time’ because this will affect
overdue and without notice that it had been your rights as a holder
previously dishonored, if such was the fact
(3) That he took it in good faith and for value Sec. 193. Reasonable time, what constitutes. - In
(4) That at the time it was negotiate to him he had no determining what is a "reasonable time" regard is to
notice of any infirmity in the instrument or defect in be had to the nature of the instrument, the usage of
the title of the person negotiating it trade or business with respect to such instruments,
and the facts of the particular case.
5. What does it mean when the “instrument is
complete and regular on its face”? 7. Is it possible for an instrument to be dishonored
and the party would not know? If it is dishonored due
Complete—complies with all the requisites under Sec to the non-acceptance of the drawee. Thus, this is
1 specifically true to BOE. When it is not accepted, the
instrument does not bear anything showing such fact
Regular—when the face of the instrument does not give and so, the instrument may still be circulated even if the
any doubts as to its authenticity. Basically, nothing on instrument had been dishonored
the face of the instrument will spark his interest to doubt
8. What is “good faith and for value”?

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change.
Good faith—absence of bad faith. Basically, honesty in
your dealings. However, as in the case of Ocampo, the These circumstances ought to have let him inquire about the
holder must show to have inquired into the issuance of the check but he did not bother to do so. Hence, the
circumstances surrounding the issuance of the SC attributed bad faith to him under Section 56 which says that
instrument. knowledge of such fact amounted to bad faith. Therefore, Dr.
Ocampo is not considered a holder in due course because he
For value—there is a consideration given for the NI has notice of the infirmity.
sufficient to support a simple contract
10. What is “infirmity in the instrument”? something
Is inadequacy of consideration render the party not wrong in the instrument as distinguished from defect in
a holder for value (asked in 403)? As a rule, the title of the person negotiating it
inadequacy is not a defect in your title. What is
considered infirmity is LACK of consideration. It may not
be for the full amount but if the parties agreed to the
consideration, you can be deemed a holder for value.
HOWEVER, when the inadequacy is so gross that it
amounts to lack of consideration, it can be considered
as a defect in your title.

Is it limited to money (asked in 403)? No, it can be


services, property, a pre-existing debt, other NI or any
definite commitment.

What is the time period (asked in 403)? From the


moment the instrument was negotiated to you or the
moment you take in the instrument

9. De Ocampo v Gatchalian case (case discussing


good faith).

De Ocampo v Gatchalian

Facts: Mrs. Gatchalian wanted to buy a car for her husband. Mr.
Gonzales, represented himself as an agent of Dr. Ocampo who
owns a clinic. She went with Mr. Gonzales to check the car
because she was interested. She wanted to see the documents
representing the title or ownership of the car but Gonzales
represented that the owner required the potential buyer to show
good intention in buying. So she issued a check. It was issued
with two parallel lines on the right corner of the check named in
favour of the payee, Dr. Ocampo at 600 pesos. It was taken by
Gonzales but he used it to pay for his wife’s medical bill.

The check was not intended to be paid for any obligation but the
clinic accepted it. In fact, it gave the change to Mr. Gonzales
because the bill was only around 500 pesos. After knowing such
fact, Mrs. Gatchalian made a Stop Payment Order to her bank.
Dr. Ocampo now wants to recover the payment of the check. He
is claiming that he is a holder in due course.

Issue: Whether Dr. Ocampo is a holder in due course.

Held: No, because she ought to have inquired into the


circumstances surrounding the issuance of the check. First and
foremost, the check is crossed.

If it’s a crossed check, the consequence is that:


1. It cannot be encashed
2. It can only be deposited in the account of the payee who
must have a bank account
3. The check is intended to be used for a definite purpose
Dr. Ocampo did not inquire as to the purpose of such check. The
check should not have been payable to the clinic because it is a
personal check and it bears the name of Mrs. Gatchalian and the
clinic does not have any dealings with her.

Moreover, the amount was not exactly equal to the hospital bill of
Mr. Gonzales’ wife. In fact it required Mr. Ocampo to give a
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October 12, 2018 (1) In the acquisition
(2) In the negotiation
1. Whose good faith is referred to who must show
good faith? Person receiving the instrument/ 6. When is there defect in the title in the acquisition?
transferee must show good faith in receiving the When the instrument is obtained, or signature thereto,
instrument by fraud, duress, or force and fear, or other unlawful
means or for an illegal consideration (Sec. 55)
2. Good faith is not just honesty in intention? No, it
also means the holder must show to have inquired into The defect in the title here is on the person negotiating/
the circumstances surrounding the issuance and acquiring the instrument. The good faith in Sec 52 refers
negotiation of the instrument. You must determine as to the good faith of the person receiving the instrument.
well if there are circumstances that should prompt a The difference between Sec 55 and Sec 52 is that Sec
cautious person to inquire on the circumstances 55 complements Sec 52d not Sec 52c. This is its
surrounding the issuance and negotiation of the difference.
instrument. It is not just limited to the intention.
Sec 52 refers to the good faith of the receiver of the
3. What are the 3 methods of giving value for an instrument. Sec 55 refers to the good faith of the person
instrument under the US Uniform Commercial negotiating it or when he acquired it. A person can have
Code? a defective title at the time he acquired the instrument
(1) To the extent that the agreed consideration has or when he negotiated it.
been performed or that he acquires a security
interest in or a lien on the instrument, otherwise Give an example of each:
than by legal process; or Fraud—you make a person sign a blank paper thinking
it was an autograph but you made a NI
This means that it does not necessarily follow that
the value of the instrument must be equivalent to Duress, Force and Fear— you hold a person at
the value of the consideration. This is why gunpoint to issue a NI
inadequacy in the consideration does not make
one not a holder for value unless the inadequacy is Illegal consideration—you give a NI to murder
so gross or unconscionable. someone

(2) When he takes the instrument in payment of or as 7. When is there defect in the title in the negotiation?
security for an antecedent claim against any when he negotiates it in breach of faith, or under such
person whether or not the claim is due circumstances as amounting to a fraud

That pre-existing debt is enough consideration to Give an example:


be considered as a holder value Breach of Faith— the instrument was intended for
safeguarding but you further further negotiated. When
(3) When he gives a NI for it or makes an irrevocable you negotiated it, was in breach of faith of the person
instrument to a third person (HOWEVER, this is entrusting it to you.
NOT applicable in the Philippines because future
services will render the instrument conditional) Such circumstances as amounting to a fraud—when
you negotiated the instrument knowing that the person
IOW, there is a barter of NI. But, this irrevocable primarily liable is already insolvent or when you
commitment to a third person is inapplicable in the negotiated it knowing it had been previously dishonored
Philippines because future services will render the already
instrument conditional.
These defects in the title do not make the
4. What is infirmity of the instrument? Refers to defects subsequent holder not a HIDC. It is his knowledge
as seen in the face of the instrument. They usually refer or notice of the defect that makes him not a HIDC.
to defects involving personal defenses and even real
defenses. When the defect pertains to a deficiency in Sec. 56. What constitutes notice of defect. - To constitutes
the instrument itself as when the instrument contains notice of an infirmity in the instrument or defect in the title
forgery or material alteration. of the person negotiating the same, the person to whom it is
negotiated must have had actual knowledge of the infirmity
Sec. 55. When title defective. - The title of a person who or defect, or knowledge of such facts that his action in
negotiates an instrument is defective within the meaning of taking the instrument amounted to bad faith.
this Act when he obtained the instrument, or any signature
thereto, by fraud, duress, or force and fear, or other unlawful 8. What constitutes knowledge? 2 possibilities.
means, or for an illegal consideration, or when he negotiates
it in breach of faith, or under such circumstances as amount The person to whom the instrument is negotiated to
to a fraud. must have had ACTUAL knowledge of the infirmity or
defect, OR knowledge of such facts that his action in
5. What is defect in the title? If it pertains to the taking the instrument amounted to bad faith
circumstances regarding the acquisition or the (CHARGEABLE KNOWLEDGE)
negotiation of the NI. The defect here is not in the
instrument itself. An example of a defect in the title is Actual knowledge—person knows of the
when the NI was not delivered but it was just stolen circumstances which cause the defect in the instrument.

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It is personal knowledge that an act happened 11. In the absence of any circumstances mentioned,
constituting the defect how will we classify a holder? There is a prima facie
presumption that all holders are holders in due course
Example: you received the instrument which
you knew at that point was stolen 12. Who has the burden of proving otherwise? It is on
the person who alleges that a holder is not a HIDC. He
Chargeable knowledge—circumstances which could must prove that there is defect in the title of the person
have placed you in inquiry but you failed to inquire negotiating or infirmity of the instrument. It could be
defect in the title of any of the indorsers or infirmity in
Example: when the person who negotiated it the instrument. After proving such, the burden of proof
to you is not the person named in the shifts to the holder. It is shifted to the holder to prove
instrument. that he is such a HIDC or that he derived his title from a
HIDC and he was not a party to the fraud (to become a
9. Discussion of the case of De Ocampo. (see above). holder through a holder in due course)
How was this illustrated in the case of Ocampo v
Gatchalian? 13. When will that shifting of burden not happen? If it
pertains to a holder prior to the defect in the title or
De Ocampo was shown to have had chargeable infirmity of the instrument. When you are a party prior to
knowledge regarding the defect in the title. the defect, you will not have to prove your due-course
holding. Only parties after will have to prove that. The
(1) There was no transaction between Ocampo and shifting will not happen then in relation to parties prior to
Gatchalian. Gatchalian had no obligation to the defect.
Ocampo
(2) The fact that the check was a crossed check. In a Sec. 54. Notice before full amount is paid. - Where the
crossed check, it is not for encashment. The check transferee receives notice of any infirmity in the instrument
should only be deposited. It should only be paid to or defect in the title of the person negotiating the same
the named payee therein who has a bank account before he has paid the full amount agreed to be paid
and can only be negotiated once. The crossed therefor, he will be deemed a holder in due course only to
check must have been issued for a specific the extent of the amount therefore paid by him.
purpose which De Ocampo must have also
inquired into. 14. Sec 54. This presupposes that notice was acquired
(3) The amount of the check did not correspond to the before the full amount of the consideration was paid.
obligation due. De Ocampo even gave change for Thus, this is an instrument payable by installment
the check received.
Further discussion during the Make-up Class
Presence of these and failure to inquire still impute as a
notice. Failure of De Ocampo to inquire as to the Sec. 58. When subject to original defense. - In the hands of
crossed check makes him in bad faith. He actually has any holder other than a holder in due course, a negotiable
notice of the defect in the title of Gonzales but he failed instrument is subject to the same defenses as if it were non-
to inquire. This is why De Ocampo was not considered negotiable. But a holder who derives his title through a
a HIDC holder in due course, and who is not himself a party to any
fraud or illegality affecting the instrument, has all the rights
Sec. 57. Rights of holder in due course. - A holder in due of such former holder in respect of all parties prior to the
course holds the instrument free from any defect of title of latter.
prior parties, and free from defenses available to prior
parties among themselves, and may enforce payment of the 15. Sec 58. Shelter principle is discussed. 2 requirements
instrument for the full amount thereof against all parties must concur: (1) you must derive title from a HIDC; and
liable thereon. (2) you must not be a party to the fraud.

10. Why will it matter if you are a HIDC? Sec. 192. Persons primarily liable on instrument. - The
person "primarily" liable on an instrument is the person
Rights of a HIDC who, by the terms of the instrument, is absolutely required
to pay the same. All other parties are "secondarily" liable.
(1) Free from any defect of title of prior parties
(2) Free from any defenses available to prior parties 16. Who are parties primarily liable?
among themselves
(3) Right to enforce payment on the whole amount of Promissory note—maker is primarily liable
the instrument against all parties liable
BOE—drawee-acceptor is primarily liable
Sec. 59. Who is deemed holder in due course. - Every holder
is deemed prima facie to be a holder in due course; but when 17. Does the law define who is a party primarily liable?
it is shown that the title of any person who has negotiated Yes under Sec 192, the person primarily liable is when
the instrument was defective, the burden is on the holder to you are absolutely required to pay the instrument.
prove that he or some person under whom he claims Otherwise, you are only a party secondarily liable to
acquired the title as holder in due course. But the last- pay.
mentioned rule does not apply in favor of a party who
became bound on the instrument prior to the acquisition of Sec. 60. Liability of maker. - The maker of a negotiable
such defective title. instrument, by making it, engages that he will pay it

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according to its tenor, and admits the existence of the payee Sir does not believe that the second view is more
and his then capacity to indorse. logical according to the book and most experts. It
18. What is the liability of a maker? As found in Sec 60, is considered a gray area. Sir will accept either way
the maker is primarily liable because: depending on your explanation

(1) he engages to pay the note according to its tenor, (2) Admits the existence of the payee and his capacity
subject to no condition whatsoever; and to indorse

whatever amount is stated in the instrument, that is This has already been discussed. The person
the amount he has to pay. primarily liable must first admit the existence of the
payee and his capacity to indorse to secure the
(2) he also warrants the existence of the payee and his negotiable character of the NI.
then capacity to indorse.
(3) Admits the existence of the drawer and the
Why does this warranty have to be stated under genuineness of his signature
the law? This is to prevent the maker from
escaping liability by showing the non-existence and
incapacity of the payee. This is to give credence to Recits from 403
the character of the negotiable instrument.
Otherwise, it would be very convenient for a person 21. What is the difference of a personal and a real
to make a NI and escape liability by saying that the defense?
payee does not exist. It would defeat the purpose
of negotiability if the maker is not made to admit Real—defenses you can raise regardless of who the
that fact. holder is

Sec. 62. Liability of acceptor. - The acceptor, by accepting Example: material alteration, forgery,
the instrument, engages that he will pay it according to the incapacity (minority or ultra vires acts) as
tenor of his acceptance and admits: regards the person entitled to raise it,
(a) The existence of the drawer, the genuineness of his incomplete and undelivered instrument
signature, and his capacity and authority to draw
the instrument; and Personal—defenses you cannot raise against a holder
(b) The existence of the payee and his then capacity to in due course and a holder through a holder in due
indorse. course

19. How about an acceptor-drawee? Does he also make Example: insertion of wrong date, complete
that admission? Yes, he also has to make that but undelivered instrument, incomplete but
admission. The acceptor has to admit that because he delivered instrument, want or failure of
is the one primarily liable to pay the instrument like how consideration
a maker should admit the same. Again, it is to give
credence to the NI because if the acceptor himself who 22. What about the liability of the drawer? He does not
is primarily liable will not admit the existence of the pay the instrument absolutely.
payee, then it cannot be further negotiated since if the
payee is not deemed to have existed, then the 23. When is a drawer liable to pay?
instrument should not have existed in the first place. If
that were to happen, it would limit or hinder the further (1) Instrument is presented for acceptance or payment
negotiation of the instrument. (2) Drawee dishonors the instrument either for non-
acceptance or non-payment
20. What are the warranties of the acceptor? (3) Necessary proceedings on dishonor are duly taken

(1) Engages to pay according to the tenor of his 24. To whom does the drawer engage to pay? Holder
acceptance subject to no condition and the subsequent indorsers

Is that different from the tenor of the 25. When is the drawer liable to pay the indorser? When
instrument? Yes, because you can always accept the holder went to the indorsers first, so he will be liable
for lesser than the amount of the instrument. That’s to reimburse the indorser.
why when an acceptor accepts the instrument
which has been altered, he becomes liable Take note: It states “subsequent indorsers” which
according to the tenor of his acceptance. However, means that this does not apply to a bearer instrument.
there are 2 views regarding this.
The drawer is just like an indorser because he is just
2 views regarding the tenor of the acceptor’s secondarily liable.
acceptance:
26. What are the things that the drawer warrants?
First view—the altered amount is what he will be Warranties of the drawer.
liable for (tenor of his acceptance)
(1) Payee is existing; and
Second view—the original amount is what he will (2) Payee has capacity to indorse
be liable for (the original tenor of the instrument)

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A drawer can make a qualification as to his or her October 13, 2018 (make up class; Thank you Brattys)
liability— negativing or limiting his own liability to a
holder or he can say sans recourse. Sec. 54. Notice before full amount is paid. - Where the
transferee receives notice of any infirmity in the instrument
27. If someone signs an instrument, how would you or defect in the title of the person negotiating the same
categorize him? Absent any indication as to his before he has paid the full amount agreed to be paid
capacity, he is considered an indorser therefor, he will be deemed a holder in due course only to
the extent of the amount therefore paid by him.
28. If there is an instrument and the person signs the
instrument prior to all parties, and there is no Example: So let’s say payable by installment, 3 times—first,
st
mention as to what capacity, how would categorize at the time instrument was negotiated, then 1 day of every
him? He would still be considered as an indorser month thereafter. The amount is 3M. 1M every payment. So
because there is no capacity indicated you paid 1M the moment the instrument was issued.

29. Example, the instrument was already signed by the Supposedly, you are a holder of the instrument, and you’re
maker. There is a payee, X. Before it was delivered considered a holder in due course when you paid value for the
to X, there was a signature of Y. How would you instrument. So you paid value to the extent of 1M, so you’re a
categorize Y? He is a regular indorser holder in due course to the extent of 1M.

30. What do you understand of an irregular indorser? Now if prior to your payment of the instrument or of the remaining
See Sec 64—person not a party to the NI places balance, you’ve acquired knowledge about the infirmity or defect
thereon his signature in blank before delivery, he is in the title of the person negotiating an instrument, you can no
liable as an indorser in accordance with the rules given. longer be considered a holder in due course at least to the extent
He may be considered as an accommodation indorser of the remaining value of the instrument.

31. To whom is an irregular indorser liable to? So that if you did pay the instrument, and you’re supposed to be
considered a holder in due course already because you paid for
(1) Payable to the order of a third person—liable to the the full amount, you can still not be considered a holder in due
payee and to all subsequent parties course for the full amount because you acquired knowledge prior
to you paying for all the balance of the instrument. That means,
(2) Payable to the order of the maker or drawer or you are only a holder in due course to the extent of 1M.
bearer—liable to all parties subsequent to the
maker or drawer If it so happens that during the time that the instrument has
been negotiated which is supposed to be paid by
(3) Signs for an accommodation of the payee—liable installment, something happens along the way when there
to all parties subsequent to the payee is a balance to be paid and it is a cause for personal defense,
can it be used against you? Yes, because you’re only a holder
32. What will be his warranties? It depends on whether in due course to the extent of 1M. For the remaining balance, you
he makes a qualification in his signature. A drawer can are not considered a holder in due course.
make a qualification as to his liability.
So defect in title, so naa gyud ni personal defense available now,
you may not be able to enforce payment anymore because there
is already defect in title which may be used against you.

The contemplation there is that if you acquired knowledge


of a certain defect before making any full payment, stop
making the payment. Otherwise, if you made the payment and
later on further negotiate the instrument, you may not be able to
get away with paying the instrument by saying you’re a holder in
due course because then you’re no longer a holder in due
course. So di na nimo ma enforce ang payment against a person
primarily liable later on.

Example:

A B C. A is maker. C is the one who will make the full


payment, and you happen to know about the defect in title
in the sense that B stole the instrument diay. You already
paid him 1M pesos, will you continue paying him after
knowing that he stole the instrument? A prudent person would
not pay.

But what if you paid for the 3M? Can you go after A then?
Sec 54 is saying that you may be able to collect the amount of
1M but I doubt if someone will really pay partially if ever the
instrument is payable freely in full one time. 1M is deemed paid
kay ni mature na ang 1M, so 2M nalang dapat ang i-bayad sa
maker in that case.

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In that case, can you compel the maker to pay you? Kay mao If you do not give a notice of dishonor to the drawer
naman ang due, ang 2M nalang, not anymore, because you’re within the required period (usually 24 hours from when
no longer a holder in due course. That is the consequence it was dishonored), he will be discharged from the
liability.
Sec. 60. Liability of maker. - The maker of a negotiable
instrument, by making it, engages that he will pay it Drawer Negativing or Limiting his Liability
according to its tenor, and admits the existence of the payee
and his then capacity to indorse. The drawer’s liability on an instrument is not absolute. Conditions
have to be complied with. Even the drawer can get away with the
Liability of the Maker (further discussed) payment of the instrument if he puts a qualification to his liability
such as negativing or limiting his liability. He can say “sans
The maker is primarily liable as he engages to pay the instrument recourse” , “without recourse”. The law gives him the right to limit
without qualification. That means there is no condition necessary his liability but that goes into the acceptability of the instrument,
before he may be liable. In fact, while it may be true that no one may be enticed to take the instrument.
presentment for payment is needed so that he will be able to
make payment, the purpose of presentment of payment is not Take note that this is different from indorsers, because with
actually to charge him but to charge persons secondarily liable. qualified indorsers, they need to have knowledge about the
So while that may have to be done in order for the holder to insolvency. For a qualified indorser, there must be notice of the
prompt the maker to make the payment, it is not actually that act insolvency so he can be held liable. That rule does not apply to
which renders him liable. a drawer. Here with the drawer, it is different—even if the drawer
has knowledge, the moment he qualifies his liability he cannot be
The moment that he drafts the instrument, he is already liable held liable. Of course, it also goes into his good faith in making
and he engages to pay regardless of the condition. But, if there an instrument even knowing that the person he is ordering cannot
are available defenses that he can raise, then he is free to do so. pay. However, the difference is that it is not a breach of warranty
because there really is no warranty as to solvency there.
As a rule, he really is liable regardless of the condition. Also, he
has to admit the existence of the payee and his capacity to Admission of the Existence of the Payee and his Capacity to
indorse in order for the instrument to be circulated, otherwise it Indorse
will be very convenient for him to make an instrument and not
hold himself liable by saying that the payee does not exist. He admits the existence of the payee and his capacity to indorse.
Same with the maker ang reason to admit it
Sec. 61. Liability of drawer. - The drawer by drawing the
instrument admits the existence of the payee and his then Sec. 62. Liability of acceptor. - The acceptor, by accepting
capacity to indorse; and engages that, on due presentment, the instrument, engages that he will pay it according to the
the instrument will be accepted or paid, or both, according tenor of his acceptance and admits:
to its tenor, and that if it be dishonored and the necessary (a) The existence of the drawer, the genuineness of his
proceedings on dishonor be duly taken, he will pay the signature, and his capacity and authority to draw
amount thereof to the holder or to any subsequent indorser the instrument; and
who may be compelled to pay it. But the drawer may insert (b) The existence of the payee and his then capacity to
in the instrument an express stipulation negativing or indorse.
limiting his own liability to the holder.
Liability of the Acceptor
Liability of the Drawer
An acceptor is the one primarily liable, because if you look at the
To make the Drawer Liable provision, there are no conditions present before he is made
liable. An acceptor just engages to pay the instrument according
In case of a drawer (same as the maker), he writes the instrument to the tenor of his acceptance; there are no other conditions.
causing the initiation of the instrument. He is not liable primarily
because before he can be made to pay, there are certain Before he is made liable though, there has to be presentment for
conditions that have to be complied with: acceptance. After all, the acceptor only becomes an acceptor
once there has been acceptance. It only becomes a condition for
(1) Presentment to the Drawee— There must be due him to become an acceptor, but not for the payment of the
presentment of the instrument to the drawee either for instrument. He is still considered primarily liable.
acceptance or payment. This is not necessary in case
of a maker Because he engages to pay the instrument according to the
tenor of his acceptance, that means if the amount is different
(2) Dishonor of the instrument— The instrument needs from the amount that he has accepted, will the instrument
to be dishonored first. be dishonored? Actually it can be dishonored, it is a qualified
acceptance which may be considered as a dishonor on the
(3) Satisfaction of the necessary proceedings for instrument. Diba when an instrument is given to you, then it has
Dishonor—While it may have been dishonored, it is not to be accepted as it is. If there will be qualifications as to the
enough that such fact exists, one must be able to acceptance, then it is deemed as if the instrument is not accepted
comply with the conditions pertaining to dishonor in as it is. So holders may opt that the instrument be dishonored.
order to charge persons secondarily liable. But if the holder considers it as dishonored, he has to follow then
the procedures of dishonor, otherwise parties secondarily liable
You have to give notices to persons secondarily liable may be considered discharged.
otherwise, they will be discharged (same rule goes to
the drawer). That’s what really happens whenever you present the
instrument for acceptance and was qualifiedly accepted. If

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you as the holder deemed it as still valid, what will happen Presumption of signing as an Indorser
to the intervening indorsers or the other persons who
became parties prior to the acceptance? They will be Section 63 says that if there is no indication that the person signs
discharged from the liability EXCEPT if they assented to the the instrument as the maker, drawer or acceptor, he is deemed
qualified acceptance. It MAY be regarded at times that the tenor to be an indorser.
of the acceptance is the same as the tenor of the instrument
because if it is qualifiedly accepted, the instrument may be Because the law absolutely categorized him as an indorser,
deemed dishonored. can he present parole evidence to say otherwise? No, it is the
law that considers him as an indorser. If he wants to be
There ought to be a difference then between what is the tenor of categorized differently then he has to indicate it through some
the instrument and the tenor of the acceptance otherwise there other words. Whatever is written in the instrument, it becomes
will be no such thing as qualified acceptance. the governing law of the parties.

As such, there are two schools of thought and opinion in What is this parole evidence? Oral evidence/testimony saying
relation to when an instrument is materially altered: what is written on a document is not what was agreed upon.
Parole evidence again is not applicable/ allowed to counter the
(1) If an instrument has been materially altered and fact that the person signing an instrument without indicating
subsequently accepted by the acceptor, then the his/her capacity is an indorser.
acceptor’s liability is according to the tenor of his
acceptance which means accepting the altered amount. Sec. 64. Liability of irregular indorser. - Where a person, not
otherwise a party to an instrument, places thereon his
Sir agrees with this because according to him what is signature in blank before delivery, he is liable as indorser, in
the point of saying under the law “engages to pay accordance with the following rules
according to the tenor of his acceptance” rather than (a) If the instrument is payable to the order of a third
according to the tenor of the instrument person, he is liable to the payee and to all
subsequent parties.
(2) The drawee-acceptor can only be held liable according (b) If the instrument is payable to the order of the maker
to the original tenor of the instrument. or drawer, or is payable to bearer, he is liable to all
parties subsequent to the maker or drawer.
The obligation of the acceptor is to comply with the (c) If he signs for the accommodation of the payee, he
order of the drawer and the order of the drawer is based is liable to all parties subsequent to the payee.
on the original tenor of the instrument
What if your signature appears before any other party could
Sec. 124 says: “A holder in due course can only be held make their signature?
liable according to the tenor of his acceptance.” Then, it
must be that the person primarily liable should be held Example: There is an instrument complete and regular on its
liable also according to the original tenor of his face, "I promise to pay X or order 1 million pesos. Sgd Y."
acceptance and that even pertains to a holder in due
course. Supposedly, if this is an order instrument, there has to be an
indorsement in the back. So who made the first indorsement that
Most experts actually adhere to this 2nd school of you can see in such instrument? It should be X, the person
thought that the drawee-acceptor should only be held indicated as the payee.
liable according to the original tenor of the instrument.
But if the signature found is not the payee but a stranger?
Either way I would accept both schools of thought in the exam Remember, the general rule is that if there is no indication as to
depending on your reason. what capacity, he is an indorser. But the instrument should have
first been issued to the payee, but it so happened that there is
Admissions of the Acceptor already a signature there.

An acceptor admits the existence of the drawer and the How would you consider such signature? He is considered an
genuineness of his signature and his capacity to draw the irregular indorser.
instrument.
Irregular Indorser
The acceptor is dependent on the order made to him so if there
is no drawer then the acceptor has nothing to accept. Because An irregular indorser is one whose signature appears on the
of this, the consequence is if there is forgery in the signature of instrument; he is not a party to the instrument but he signs the
the drawer, the acceptor should be liable for after all he admits instrument prior to its delivery. These are the requirements for an
that there is genuineness in the signature of the drawer. That is irregular indorser.
why between a collecting bank and a drawee-bank, if there is
forgery in the signature of the drawer, then the drawee bank is Reason for an Irregular Indorser
liable for the reason that the drawee bank warrants the
genuineness of the signature of the drawer. When you want to add credit or credibility to the instrument so
that it can add more to its acceptability.
Sec. 63. When a person deemed indorser. - A person placing
his signature upon an instrument otherwise than as maker, In most instances this irregular indorser is considered as an
drawer, or acceptor, is deemed to be indorser unless he accommodation indorser. The other name for an irregular
clearly indicates by appropriate words his intention to be indorser is an anomalous indorser.
bound in some other capacity.
Liability of such Anomalous Indorser

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Otherwise, his title might be affected. If the instrument was stolen
His liability is the same as any other indorser. He has warranties and he further negotiated the instrument, you caused a stolen
the same as that of a general indorser. An irregular indorser instrument to be circulated to the public, so in effect he should be
simply signs the instrument without indicating anything else, so held liable. The moment you further negotiated the instrument,
general indorser but an irregular one. But his liability though is you made people believe you have good title to it.
limited in a sense that it only pertains to parties after his
signature. (c) that all prior parties had capacity to contract

Section 64(a)— if the instrument is payable to the order of a You have to make sure that no one is a minor or illegally
third person, he is liable to the payee and to all subsequent capacitated to sign.
parties.
The provisions of subdivision (c) in relation to capacity to contract
“I promise to pay X or order 1 million. Signed Y” does not extend to government securities.

The first person to sign is S. S will then be liable to X and to all Example:
parties after X.
A person who is a holder of a treasury warrant further
Section 64(b)— if the instrument is payable to the order of negotiated the treasury warrant in his personal capacity.
the maker or drawer, or is payable to bearer, he is liable to
all parties subsequent to the maker or drawer. Did he warrant the capacity of the prior parties? No, he did not.
But as to the other warranties, he still warrants those.
The same as 64(a), because the parties after the maker or
drawer is still the payee and the subsequent parties to the payee. Treasury warrant is issued by the government. The provision to
capacity to contract may not be applicable in relation only to the
Section 64(c)— if he signs for the accommodation of the party who actually further negotiated it.
payee, he is liable to all parties subsequent to the payee.
If the instrument negotiated is a public security, the warranties to
The accommodation party is liable only to the parties subsequent the capacity of prior parties do not apply.
to the payee whom he has accommodated.
(d) that he has no knowledge of any fact which would
In other words, an irregular indorser is liable to parties impair the validity of the instrument or render it
subsequent to him. valueless.

Sec. 65. Warranty where negotiation by delivery and so This requires actual knowledge. If you do not have knowledge,
forth. — Every person negotiating an instrument by delivery then you cannot be held liable. But if you have knowledge or
or by a qualified indorsement warrants: knowledge that can be imputed because sometimes it is a public
(a) That the instrument is genuine and in all respects knowledge, in that case you can be liable. This could also be said
what it purports to be; to holders who have notice of infirmities in the instrument but did
(b) That he has a good title to it; not bother to inquire about it.
(c) That all prior parties had capacity to contract;
(d) That he has no knowledge of any fact which would Example: A cross check— it should have been indorsed only
impair the validity of the instrument or render it once, but it was negotiated again. You cannot feign knowledge
valueless. since na cross naman siya, it should not have been indorsed
But when the negotiation is by delivery only, the warranty further.
extends in favor of no holder other than the immediate
transferee. You cannot feign innocence of such fact if there are
circumstances which would have required you to inquire but you
The provisions of subdivision (c) of this section do not apply did not. This is considered notice.
to a person negotiating public or corporation securities
other than bills and notes. Sec 65 for a Person Negotiating by Delivery (PNBD)

Warranties of a person negotiating by delivery and Qualified He is only liable to his immediate transferee in relation to his
Indorsers warranties. The warranties extend only to the immediate
transferee.
(a) that the instrument is genuine and in all respects
what it purports to be Sec 65 for a Qualified Indorser

Because this is a warranty, if there is anything that is not genuine But a qualified indorser, he can still be liable to everyone.
on the instrument, parties who indorse it after the alteration,
modification or anything that renders the instrument no longer Sec. 66. Liability of general indorser. - Every indorser who
genuine, he can no longer say otherwise because he made indorses without qualification, warrants to all subsequent
persons subsequent to him believe that the instrument is holders in due course
genuine. The moment he further negotiates an instrument he (a) The matters and things mentioned in subdivisions
would already admit that the instrument is genuine. (a), (b), and (c) of the next preceding section; and
(b) That the instrument is, at the time of his
(b) that he has a good title to it indorsement, valid and subsisting;
And, in addition, he engages that, on due presentment, it
He has to make sure that the person from whom he received the shall be accepted or paid, or both, as the case may be,
instrument actually is the real owner of the instrument. according to its tenor, and that if it be dishonored and the

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necessary proceedings on dishonor be duly taken, he will
pay the amount thereof to the holder, or to any subsequent Example:
indorser who may be compelled to pay it.
A—B—C—D. That is the order of their payment.
Warranties of a General Indorser
D can go after C, then B then A. But if it is an indorsement, you
The warranties are the same as Section 65, except the last can skip the parties and go directly to the person most prior of
warranty. Sec 65(d) requires knowledge, but in Sec 66, it does them all. After all, you’re just trying to lessen the time. Because if
not require knowledge. The fact that the instrument is valid and you follow strictly the order, it will still end up to the person most
subsisting— that would already render you liable whether you prior paying for the instrument. But of course, nothing will stop
have knowledge or not. Notice or knowledge is not necessary if you from following the sequence as contemplated by the law.
you are a general indorser.
Sec. 69. Liability of an agent or broker. - Where a broker or
Unlike Sec 65, in Sec 66, there is an engagement to pay the other agent negotiates an instrument without indorsement,
instrument if it is not paid by the person primarily liable. This is he incurs all the liabilities prescribed by Section Sixty-five
the warranty on the solvency of the person primarily liable. If of this Act, unless he discloses the name of his principal and
there is no payment on the instrument, then you can be held the fact that he is acting only as agent.
liable as a party secondarily liable. Secondarily liable because
there is still a need for due presentment and that if dishonored, Liability of an Agent or Broker
the necessary proceedings on dishonor be duly taken.
If you don’t want to be personally liable for the instrument as you
Is this only true if the issue is insolvency? What if the are merely representing a principal, you must indicate your
instrument is forgery does that mean I am not secondarily principal and your capacity for signing. Otherwise, you will be
liable? You are secondarily liable because of a breach of considered personally liable.
warranty.
Sec. 143. When presentment for acceptance must be made.
Sec. 67. Liability of indorser where paper negotiable by - Presentment for acceptance must be made
delivery. — Where a person places his indorsement on an (a) Where the bill is payable after sight, or in any other
instrument negotiable by delivery, he incurs all the liability case, where presentment for acceptance is
of an indorser. necessary in order to fix the maturity of the
instrument; or
Liability of an Indorser where Paper is Negotiable by (b) Where the bill expressly stipulates that it shall be
Delivery presented for acceptance; or
(c) Where the bill is drawn payable elsewhere than at
Even if it is a bearer instrument, it may still be indorsed. But take the residence or place of business of the drawee.
note of Sec 40, if you indorse in a bearer instrument, you will be In no other case is presentment for acceptance necessary in
liable as an indorser but only as regards a party who is able to order to render any party to the bill liable.
trace title to your indorsement. If you indorsed unqualifiedly, then
you are liable for all warranties of a general endorser or if you Presentment for Acceptance
qualified your endorsement then you are liable under Sec 65 not
as a person making a qualified endorsement. Presentment for acceptance is only applicable for bills of
exchange.
Sec. 68. Order in which indorsers are liable. - As respect one
another, indorsers are liable prima facie in the order in which Presentment for acceptance is not necessary to charge a person
they indorse; but evidence is admissible to show that, as primarily liable. The moment the instrument is effected or made,
between or among themselves, they have agreed otherwise. the person primarily liable already becomes liable with no
Joint payees or joint indorsees who indorse are deemed to conditions to such liability.
indorse jointly and severally.
This is then only necessary to make the person secondarily
Order of Liability of Indorsers liable, liable.

In the reverse order by which they sign the instrument. When do you present an instrument for acceptance?

The liability will start, if you’re trying to pursue a party or look at General Rule: The law actually limits it, only in these three
the liability of the parties, you start from the holder and then in instances:
the order by which it is signed. It is in the reverse order, actually.
(1) Where the bill is payable after sight or in any other
General Rule: You will follow that order. So the person who signs cases where presentment for acceptance is
later, has a cause of action against the person prior to him. necessary in order to fix the maturity of the
instrument.
Exception: If there are agreements among the parties, but those
parties who are not privy to such agreement will not be bound by Payable after sight— So if it says, “payable 10 days after sight”.
it. You have to present the instrument for acceptance, otherwise
you will not know when the instrument will become due.
If such is the case, then that will be followed as between you. But
in relation to the holder, you will still follow the usual order. That Where presentment for acceptance is necessary in order to
is why as a rule you can only go to the person prior to you, it fix the maturity of the instrument— If it is not after sight then it
could not be otherwise. After all, you paid for the instrument to could be at sight. In which case you still have to present the
the person prior to you. instrument for acceptance.

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Failure to Present Releases Parties Secondarily Liable


(2) When the bill expressly stipulates that it has to be
presented for acceptance. It says there it must be presented for acceptance because if you
fail to do so the drawer and all indorsers are discharged.
Example: “To: B. Pay to X or order 1M pesos. Presentment for
acceptance is necessary. Sgd. A” 2 options for a holder of an instrument which requires
presentment for acceptance:
In that case the instrument has to be presented for acceptance
before the party secondarily liable becomes liable. (1) To present the instrument for acceptance within
reasonable time; OR
(3) Where the bill is drawn payable elsewhere than at (2) To further negotiate the instrument (so that it would be
the residence or place of business of the drawee. the next holder who will have to present it within
reasonable time)
So if the drawee has to make arrangements for the payment, he
has to know first that the liability exists. Otherwise, the person Sec. 145. Presentment; how made. - Presentment for
may find it hard to make such arrangements. acceptance must be made by or on behalf of the holder at a
reasonable hour, on a business day and before the bill is
Example: If the instrument is supposed to be payable in Manila overdue, to the drawee or some person authorized to accept
but the drawee lives here in Cebu. If you don’t present the or refuse acceptance on his behalf; and
instrument for acceptance, how will he make arrangements for (a) Where a bill is addressed to two or more drawees
the payment in Manila? who are not partners, presentment must be made to
them all unless one has authority to accept or
Relevance of these 3 Instances refuse acceptance for all, in which case
presentment may be made to him only;
If it is a bill of exchange, it goes without saying that you present (b) Where the drawee is dead, presentment may be
it for acceptance. There will be no acceptor if you don’t present it made to his personal representative;
for acceptance. (c) Where the drawee has been adjudged a bankrupt or
an insolvent or has made an assignment for the
To say that these three are the only instances when an benefit of creditors, presentment may be made to
instrument is to be presented for acceptance only means that the him or to his trustee or assignee.
instrument has to be presented for acceptance in accordance
with the requirements under the law. That you have to follow How to Make Presentment
strictly instructions for presentment for acceptance.
Take note on who must present the instrument - it is the holder
In all other instances, it need not follow all other conditions on or his representative.
how presentment for acceptance is supposed to be made. Even
if you don’t follow how presentment is supposed to be made, the When should you make the presentment? At a reasonable
parties will still be bound. It is not even necessary to charge them hour on a business day and before the instrument is overdue.
as parties secondarily liable. That is the distinction.
To whom will you present the instrument? To the drawee or
Example: You presented the instrument for acceptance in Ayala, to some person authorized to accept or refuse acceptance on his
when it is required under the law to be at the place of residence behalf. There is no particular requirement as to when you're the
or business of the drawee. Okay lang na wala ka ni-follow if it one presenting for acceptance. But in case of the person
happens to be an instrument which does not require presentment accepting, the agent has to be duly authorized. Because if not,
under the law (Sec 143). it's deemed not accepted.

But of course, you really have to present. Even if the instrument Where the bill is addressed to or more drawees who are not
is not required under the law to be presented for acceptance, it partners.
behooves you as a holder to present it for acceptance, otherwise
there is no one that you can go after for payment of the Then you have to present to all of them, otherwise, it is deemed
instrument. not accepted. But if one of them is authorized to represent the
others then presentment to such authorized person will be
It is just that under these three instances, you really have to follow sufficient.
how presentment for acceptance is supposed to be made,
otherwise the instrument is deemed not accepted. And, parties Where the drawee is dead
secondarily liable will not be bound.
If the drawee is already dead, then you have to present it to his
IN THE THREE INSTANCES, FOLLOW THE RULES ON personal representative. You have to exercise due diligence to
PRESENTMENT PROVIDED BY LAW. FOR ALL OTHER determine if he has a personable representative because if he
BILLS OF EXCHANGE, DO NOT FOLLOW. THEY WILL STILL doesn't have, then it may be excused.
BE HELD LIABLE.
You have to make sure that there is no personal representative.
Sec. 144. When failure to present releases drawer and Because if he happens to have a personal representative and
indorser. - Except as herein otherwise provided, the holder you did not present it, the instrument is deemed not presented
of a bill which is required by the next preceding section to for acceptance. The consequence will be that all parties
be presented for acceptance must either present it for secondarily liable will be discharged.
acceptance or negotiate it within a reasonable time. If he
fails to do so, the drawer and all indorsers are discharged.

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CLARIFICATION: Authors believe that presentment to be made acceptance before 12 o'clock noon at that day. You differentiate
to the dead-drawee’s representative is merely PERMISSIVE. If that from Sec 85.
the person is dead, you need not present it for acceptance at all.
But, if you want to make a presentment, it has to be made to the Under Sec 85, if it happens to be a Saturday, then next
personal representative. succeeding business day na. But under Sec 146, for purposes of
presentment for acceptance, if Saturday, then naa kay up to 12
Where the drawee has been adjudged a bankrupt or an o'clock noon. The reason is because if it's just acceptance, you
insolvent or has made an assignment for the benefit of the don't really have to make arrangement with the bank. Di man
creditors kinahanglan muadto ka sa banko that's why kutob ra siya 12 nn.

(This only happens if the person is insolvent or adjudged Sec. 147. Presentment where time is insufficient. - Where the
bankrupt) Then presentment may be made to him or his trustee holder of a bill drawn payable elsewhere than at the place of
or such assignee. You usually make assignment for the benefit business or the residence of the drawee has no time, with
of your creditor when you're also insolvent and the usual the exercise of reasonable diligence, to present the bill for
assignee there is one who is a business expert and he tries to acceptance before presenting it for payment on the day that
rehabilitate in your behalf. it falls due, the delay caused by presenting the bill for
acceptance before presenting it for payment is excused and
In that case, you have to present your claim to such a person. If does not discharge the drawers and indorsers.
you fail to do that, the instrument may be deemed not presented
for acceptance, and the person secondarily liable may be Insufficient Time for Presentment
discharged.
Where the instrument has to be presented for acceptance and
For those instances that it is required to be presented for there is not enough time for it to be paid right after it is accepted,
acceptance, you have to strictly follow what is provided under the then the consequent delay in the presentment for payment
law. Otherwise, it becomes an excuse for the person secondarily (caused by presenting the bill for acceptance) may be excused
to discharge their liability or to excuse payment under the and it will not cause a discharge of the drawer and indorsers.
instrument.
Supposedly di ba it is always within reasonable time that you
Sec. 72. What constitutes a sufficient presentment. - make presentment for payment and presentment for acceptance.
Presentment for payment, to be sufficient, must be made
(a) By the holder, or by some person authorized to Let's say the instrument is due for payment on Oct 14 (tomorrow),
receive payment on his behalf; it will be presented for payment in the US and you happen to
(b) At a reasonable hour on a business day; have received the instrument just today (Oct 13), so you only
(c) At a proper place as herein defined; have today within which to present the instrument for
(d) To the person primarily liable on the instrument, or acceptance. Now the drawee happens to be in Cebu so you will
if he is absent or inaccessible, to any person found go to him for presentment of acceptance. But makalarga ka karon
at the place where the presentment is made. sa US maabot kaha ka ugma? No, sunod ugma pa siguro.

Sec. 85. Time of maturity. - Every negotiable instrument is Under regular circumstances, when it's already difficult to make
payable at the time fixed therein without grace. When the presentment for payment because of the lack of time, the delay
day of maturity falls upon Sunday or a holiday, the for the presentment for payment may be excused, DILI ANG
instruments falling due or becoming payable on Saturday PRESENTMENT MISMO. It has to be for a delay that is not
are to be presented for payment on the next succeeding attributable to your fault. You will still have to go to the US but the
business day except that instruments payable on demand delay in going there for presentment for payment is excused.
may, at the option of the holder, be presented for payment
before twelve o'clock noon on Saturday when that entire day What is excused is only the delay caused by presenting the
is not a holiday. instrument for acceptance before presenting it for payment
and it does not discharge the drawer and indorsers.
Sec. 146. On what days presentment may be made. - A bill
may be presented for acceptance on any day on which Here I mentioned the delay in the presentment for payment is
negotiable instruments may be presented for payment excused, actually it’s not just the delay in the presentment for
under the provisions of Sections seventy-two and eighty- payment. In some cases, this can be applied to delays in the
five of this Act. When Saturday is not otherwise a holiday, presentment for acceptance.
presentment for acceptance may be made before twelve
o'clock noon on that day. Example: Same situation above. Even if you exercise diligence
to fly to US, then naay bagyo today, bagyo again tomorrow, then
Days you may Present for Acceptance the next day nag tsunami, you will still not be able to present the
instrument for acceptance (let's say supposedly it's for
Sec 72 will pertain to presentment for payment. It mentions there presentment for acceptance in the US). You will no longer be
what could be considered sufficient. able to present the instrument for acceptance within the
reasonable time required. In that case, the delay for presentment
Sec 85 will tell us that in case the instrument is payable at a fixed for acceptance may be excused.
period and that fixed period falls on a Sunday or a holiday, the
instrument can be presented for acceptance on the next If there is a circumstance that prevents you from making the
succeeding business day. But that is under Sec 85. Look at Sec presentment and it is not due to your fault, it's always
146. excused. But take note, what is excused is just the delay not
the presentment for acceptance itself.
Sec 146 says that even if it is a Saturday and that Saturday is not
a holiday, you are supposed to present the instrument for

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Sec. 148. Where presentment is excused. - Presentment for Sec. 151. Rights of holder where bill not accepted. - When a
acceptance is excused and a bill may be treated as bill is dishonored by nonacceptance, an immediate right of
dishonored by non-acceptance in either of the following recourse against the drawer and indorsers accrues to the
cases: holder and no presentment for payment is necessary.
(a) Where the drawee is dead, or has absconded, or is
a fictitious person or a person not having capacity When Instrument is Dishonored by Non-acceptance
to contract by bill.
(b) Where, after the exercise of reasonable diligence, In these instances, you can consider the instrument as not
presentment can not be made. accepted. It matters that you know when an instrument is not
(c) Where, although presentment has been irregular, accepted because there is a concomitant obligation on the part
acceptance has been refused on some other of the holder to inform all parties secondarily liable that the
ground. instrument has been dishonored. Otherwise, they will be
discharged from their liabilities.
Sec 147 distinguished from Sec 148
The moment the instrument is presented for acceptance and it is
In Sec 148, the presentment for acceptance itself is what is not accepted (so deemed dishonored), you need not wait for the
excused. In this case, you may not be able to present the maturity of the instrument before you can proceed against parties
instrument for acceptance, but it will not cause the secondary secondarily liable. After all, even if you wait until then the
parties to be discharged from their liabilities. instrument will still not be paid. The moment the instrument has
been dishonored by non-acceptance, there is an automatic
(1) When the drawee is dead— this could be excused but recourse against parties secondarily liable because it has already
if ever the drawee has a personable representative, you been dishonored.
have to present it to the personable representative,
otherwise the instrument is deemed not presented for
acceptance.

(2) When the drawee has absconded— ang drawee


mismo ang ni ikyas, of course that make sense. Bisag
unsaon pa nimo ug apas, kung di jud siya magpakita wa
jud kay mabuhat.

(3) When the drawee is a fictitious person or a person


not having capacity to contract by bill— you need
not present the instrument for acceptance. In that case,
you will go after the drawer.

(4) When you have exercised reasonable diligence and


presentment cannot be made—the drawee lives in a
secluded place and you go to his house to present it for
acceptance, no matter how you approach the house,
you will never be able to approach it. Even if you
exercise due diligence, you will still not be able to
present it for acceptance.

(5) When the instrument is presented for acceptance


not in the usual way— if supposedly you presented
the instrument for acceptance to the drawee in Ayala on
a Sunday because you saw him. If his reason for non-
acceptance was not because the presentment was
irregular but because of some other reason, then
presentment is deemed excused. You need not present
again within reasonable time or need present again
following the usual procedures under the law.

Sec. 149. When dishonored by nonacceptance. - A bill is


dishonored by non-acceptance
(a) When it is duly presented for acceptance and such
an acceptance as is prescribed by this Act is
refused or can not be obtained; or
(b) When presentment for acceptance is excused and
the bill is not accepted.

Sec. 150. Duty of holder where bill not accepted. - Where a


bill is duly presented for acceptance and is not accepted
within the prescribed time, the person presenting it must
treat the bill as dishonored by nonacceptance or he loses
the right of recourse against the drawer and indorsers.

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It is mentioned there that it should be “at a reasonable
Sec. 143. When presentment for acceptance must be made. hour on a business day made by the holder or his
- Presentment for acceptance must be made representative to the drawee or his authorized
(a) Where the bill is payable after sight, or in any other representative”. On the part of the holder presenting for
case, where presentment for acceptance is acceptance, the authority may not even be established.
necessary in order to fix the maturity of the But, for one who will make the acceptance, authority will
instrument; or have to be established. The reason for this is when you
(b) Where the bill expressly stipulates that it shall be present the instrument for acceptance, it does not
presented for acceptance; or create a liability on the part of the person presenting. In
(c) Where the bill is drawn payable elsewhere than at fact, it benefits the person presenting for acceptance.
the residence or place of business of the drawee. But, on the part of the person who will make the
In no other case is presentment for acceptance necessary in acceptance, it will create a liability. So, the person who
order to render any party to the bill liable. will make such acceptance will have to be duly
authorized.
1. Is presentment for acceptance necessary for all
BOE? Not necessary, only on the 3 circumstances in Going back to when an instrument can be presented
Sec 143. for acceptance and then it may be excused—when
the drawee is dead. See Sec 145(b). Authors believe
It is necessary for Sec 143(a) because it is in order to that presentment to be made to the dead-drawee’s
establish the maturity date of the instrument representative is merely PERMISSIVE. If the person is
dead, you need not present it for acceptance at all. But,
It is necessary for Sec 143(b) because it is in if you want to make a presentment, it has to be made to
compliance with the agreement of the parties the personal representative.

It is necessary for Sec 143(c) to allow the drawee to Sec. 132. Acceptance; how made, by and so forth. - The
make arrangement for payment because then you acceptance of a bill is the signification by the drawee of his
present it other than the place where payment is to be assent to the order of the drawer. The acceptance must be
made. in writing and signed by the drawee. It must not express that
the drawee will perform his promise by any other means
Example: You’re here in Cebu but payment is than the payment of money.
to be made in Manila. If there is no
presentment for acceptance made by the 3. What is acceptance? Acceptance is the signification of
holder then you will not have to make any the assent of the drawee. IOW, it simply means the
arrangement just yet. To give you time and to manifestation of the consent of the drawee to the order
allow you to make arrangement in Manila, of the drawer
presentment for acceptance is necessary.
Sec. 133. Holder entitled to acceptance on face of bill. - The
Aside from these circumstances, presentment for holder of a bill presenting the same for acceptance may
acceptance is not necessary. However, the effect if no require that the acceptance be written on the bill, and, if
presentment for acceptance is made is that it will such request is refused, may treat the bill as dishonored.
discharge the parties secondarily liable, specifically the
indorsers and the drawer. Again, only in these 3 Sec. 134. Acceptance by separate instrument. - Where an
circumstances ha, so that if there is no presentment for acceptance is written on a paper other than the bill itself, it
acceptance in the case of an instrument payable on does not bind the acceptor except in favor of a person to
demand, such presentment is not necessary to charge whom it is shown and who, on the faith thereof, receives the
the drawee as the party primarily liable. bill for value.

Presentment for acceptance is not necessary to 4. How should acceptance be made? It has to be (1) in
charge the party primary liable which is the drawer. writing, (2) must bear the signature of the drawee, (3)
It is necessary in order to charge the parties must expressly state that the promise shall be
secondarily liable to be liable. If you don’t comply performed by payment in money only, and (4) delivered
with the presentment for acceptance then parties to the holder.
secondarily liable may be discharged, but only on
those instruments required under the law to be Otherwise, that acceptance is not valid. If the instrument
presented for acceptance under Sec 143. All the rest is not accepted, it is deemed dishonored by non-
may be presented for acceptance if you want but if acceptance.
you don’t, it does not actually affect the liabilities of
the parties secondarily liable. So, in that case, you 5. Could it be accepted with additional undertaking
will just present it for payment following the rules other than payment of money? No, it should be
thereof. unconditional. There cannot be any other undertaking
to be done other than payment of money.
2. The law also specifically provides as to how
presentment for acceptance is made. Is the place 6. Where should the acceptance be signified? In the
for presentment for acceptance necessary? The face of the bill itself or it may be made in a separate
place for presentment of acceptance is not necessary instrument. However, if it is made in a separate paper,
as it is not part of the requirements. What is necessary it shall not bind the acceptor unless the holder knew of
is when, to whom and who will make such presentment the acceptance in such instrument.
of acceptance.

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7. Can the holder refuse that the acceptance is made
in a separate paper? Yes, if the instrument is not Sec. 136. Time allowed drawee to accept. - The drawee is
accepted on its face but on a separate piece of paper, allowed twenty-four hours after presentment in which to
the holder can refuse and he may treat the bill as decide whether or not he will accept the bill; the acceptance,
dishonored by non-acceptance. In that case, since if given, dates as of the day of presentation.
dishonor has already happened, you would have to
follow the procedure for dishonor. Sec. 137. Liability of drawee returning or destroying bill. -
Where a drawee to whom a bill is delivered for acceptance
8. Ideally, acceptance has to be made on the face of destroys the same, or refuses within twenty-four hours after
the instrument itself. But, if there are people who such delivery or within such other period as the holder may
agree to the acceptance made in a separate paper, allow, to return the bill accepted or non-accepted to the
what should be done to bind the acceptance? It has holder, he will be deemed to have accepted the same.
to be shown to the parties who will be receiving the
instrument as a holder. Otherwise, they will not be Sec. 138. Acceptance of incomplete bill. - A bill may be
bound by such acceptance because what is necessary accepted before it has been signed by the drawer, or while
is that the person must rely on the acceptance to be otherwise incomplete, or when it is overdue, or after it has
bound by it. They can only rely on it if they knew about been dishonored by a previous refusal to accept, or by non
the separate paper with the acceptance shown to them. payment. But when a bill payable after sight is dishonored
by non-acceptance and the drawee subsequently accepts it,
What is usually done is that they will attach the paper the holder, in the absence of any different agreement, is
where the acceptance is made so that if the instrument entitled to have the bill accepted as of the date of the first
is circulated, it goes with it. People will most likely presentment
accept an instrument that is already accepted than an
unaccepted instrument because then there would be 12. Is there a time table within which to accept? The
more people to go after and of course, you can go after drawee has 24 hours from presentment to decide
the drawee if ever. whether to accept or not.

Sec. 135. Promise to accept; when equivalent to acceptance. 13. Illustrate. The instrument was presented for
- An unconditional promise in writing to accept a bill before acceptance 11 am today. So, you only have until 11 am
it is drawn is deemed an actual acceptance in favor of every tomorrow to accept or not. You start counting from when
person who, upon the faith thereof, receives the bill for it was presented for acceptance by the holder. The 24-
value. hours is very strict.

Sec. 138. Acceptance of incomplete bill. - A bill may be 14. What happens if the 24-hours lapsed and you did
accepted before it has been signed by the drawer, or while not do anything about the instrument presented to
otherwise incomplete, or when it is overdue, or after it has you? There is constructive acceptance. In that case,
been dishonored by a previous refusal to accept, or by non there has to be demand made. Otherwise, you cannot
payment. But when a bill payable after sight is dishonored also say there was retention. There must be
by non-acceptance and the drawee subsequently accepts it, presentment for acceptance and before 24 hours, there
the holder, in the absence of any different agreement, is has to be a demand for it to be returned.
entitled to have the bill accepted as of the date of the first
presentment. For there to be constructive acceptance, it must be that
demand is made for the return of the instrument and that
9. Is it possible to accept an instrument even before it there was refusal to return within 24 hours. This also
is created? Yes, such an acceptance should be an happens when the drawee destroys the instrument
unconditional promise in writing to accept the bill. The because it would be easy to infer that there is refusal to
acceptance is the one that is considered unconditional. accept.
It goes without saying that you also accept the liability
to pay the instrument. Clarification (regarding Akeem’s question): There is
jurisprudence however, suggesting that demand for the
10. Who will be bound by such acceptance? The paper return of the instrument is not necessary before we can
itself which bears the unconditional promise of conclude that there is constructive acceptance.
accepting an inexistent instrument will have to be shown However, for Atty, he thinks that it is peculiar that you
to the party so that you can say that they have relied on deem it to be constructively accepted when you did not
it. It is a matter of proving on the part of the party who even bother to demand it to be returned. Atty thinks that
would wish to demand payment from the party to prove demand must first be made before we can presume
that the unconditional promise to accept has been constructive acceptance.
shown to him and that the said party had relied on the
acceptance before he further negotiated the instrument. 15. What if by accident, the instrument was just thrown
in the fireplace, is there still constructive
11. Can they just not be informed? Would that be acceptance? There must be intentional destruction of
enough for them to say that they have relied on it? the bill. It cannot just be by accident for it to amount to
It would be very difficult to prove that. But, under the acceptance.
law, it is not shown to be prohibited. It is suggested,
however, that the unconditional promise in writing to 16. Even if the instrument is incomplete, already
accept the instrument must be shown to them. overdue or it had been previously dishonored (by
Otherwise, it would be very easy to deny it. What is non-acceptance or non-payment), you can still have
contemplated is that you exhibit that unconditional the instrument accepted. The drawee is given a
promise and you prove that they have relied on it broad leeway to accept the instrument.

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stated on the instrument
But, if it was already previously dishonored and the
holder did not bother to comply with the Example: If the instrument is worth 20k but you
proceedings for dishonor, the parties secondarily only accepted 2k
liable will be discharged. If the drawee
subsequently accepts this, can the holder go after Local—there is a restriction as to the place of payment
the discharged parties? Not anymore. The holder can as the exclusive place for payment. “Locational
only go after the acceptor. Limitation”.

What is important in Sec 138 is that if ever the Example: “I accept this instrument. Payable
instrument was previously dishonored and ONLY in Cebu City”
subsequently accepted, it is deemed accepted from the
time it was first presented for acceptance. The reason If it says “Payable in Cebu City”, it is still not
for this is to establish especially on that instrument considered qualified because there is no
where acceptance is necessary to determine maturity. restrictive word as to where it is payable. There
Since you have accepted it now, considering the fact is no prohibition on the part of the holder to
that it had been previously presented for acceptance, have it presented for payment in some other
the counting of the date for purposes of maturity should place. It has to contain the word “only” for it to
already run. It should benefit the party who first be considered as a Local Qualified
presented it for acceptance. Acceptance. There must be exclusivity of the
place where the instrument is to be paid.
Sec. 139. Kinds of acceptance. - An acceptance is either
general or qualified. A general acceptance assents without Qualified as to time—there is a time limitation. The
qualification to the order of the drawer. A qualified drawee accepts the instrument but changes the date of
acceptance in express terms varies the effect of the bill as payment. “Time Limitation”
drawn.
Example: If the instrument says it is payable
17. What are the kinds of acceptance? There are only 2 30 days after sight and the acceptor accepted
types of acceptance—General or Qualified this way: “I accept this instrument and will pay
60 days after sight.” In that sense, the acceptor
Sec. 140. What constitutes a general acceptance. - An changed the instrument as to the time.
acceptance to pay at a particular place is a general
acceptance unless it expressly states that the bill is to be Acceptance of some, one or more of the drawees
paid there only and not elsewhere. but not all of them

18. When is there General Acceptance? When it is Example: If the instrument says “To: X, Y and
accepted by the drawee without imposing any Z. Pay to the order of A P10k. Sgd. B.” If only
conditions or any qualifications X and Y accepted the instrument, then it is a
qualified acceptance since not all of the
Sec. 141. Qualified acceptance. - An acceptance is qualified drawees accepted the instrument.
which is:
(a) Conditional; that is to say, which makes payment by Of course, it is different if the drawees are
the acceptor dependent on the fulfillment of a solidary liable because this will not apply. If
condition therein stated; only one of the solidary drawees accept, you
(b) Partial; that is to say, an acceptance to pay part only can still collect the full amount. This
of the amount for which the bill is drawn; contemplates a situation where if someone will
(c) Local; that is to say, an acceptance to pay only at a not accept the instrument, the amount of the
particular place; liability will change.
(d) Qualified as to time;
(e) The acceptance of some, one or more of the Sec. 142. Rights of parties as to qualified acceptance. - The
drawees but not of all. holder may refuse to take a qualified acceptance and if he
does not obtain an unqualified acceptance, he may treat the
19. How about a Qualified Acceptance? When there are bill as dishonored by non-acceptance. Where a qualified
restrictions imposed by the drawee, and such acceptance is taken, the drawer and indorsers are
conditions imposed will vary the effect of the instrument discharged from liability on the bill unless they have
compared to when it is generally accepted. What is expressly or impliedly authorized the holder to take a
written on the instrument must have been modified qualified acceptance, or subsequently assent thereto. When
making its effect different the drawer or an indorser receives notice of a qualified
acceptance, he must, within a reasonable time, express his
20. What are the different types of Qualified dissent to the holder or he will be deemed to have assented
Acceptance? thereto.

Conditional— makes the payment by the acceptor 21. What is your obligation as a holder if there is
dependent in the fulfillment of a condition qualified acceptance? You have a choice whether to
refuse or accept the qualified acceptance. However,
Example: “I accept this instrument provided ultimately you always have the obligation to give notice
the holder passes the Bar Exam” to all parties who are secondarily liable.

Partial—if there is acceptance not of the full amount as If you refuse and you do not get an unqualified

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acceptance, then it will be considered dishonored. If you October 16, 2018
accept it, the parties secondarily liable will be
discharged if they do not assent thereto or did not 1. Is there an instance where acceptance is made not
expressly or impliedly authorize the qualified in writing? Yes, there can be such acceptance in the
acceptance. form of constructive acceptance. If the drawee did not
return the instrument after 24 hours from presentment
In all instances, you will have to inform the parties or if the bill/note had been destroyed intentionally, it is
secondarily liable regardless whether you accept or considered as constructive acceptance.
refuse such qualified acceptance. In this case, it would
seem that a qualified acceptance can be a cause for the Sec. 70. Effect of want of demand on principal debtor. -
dishonor of the instrument. Presentment for payment is not necessary in order to charge
the person primarily liable on the instrument; but if the
22. If you notice in acceptance and presentment for instrument is, by its terms, payable at a special place, and
acceptance, it falls under the Chapter of BOE he is able and willing to pay it there at maturity, such ability
because it only applies to BOE. and willingness are equivalent to a tender of payment upon
his part. But except as herein otherwise provided,
Now, we will go back to a concept that is applicable presentment for payment is necessary in order to charge the
to both PN and BOE—Presentment for Payment drawer and indorsers.

Is presentment for payment required to charge the Sec. 83. When instrument dishonored by non-payment. - The
person primarily liable? No, it is not to make the instrument is dishonored by non-payment when:
person primarily liable, liable. (Continuation tomorrow) (a) It is duly presented for payment and payment is
refused or cannot be obtained; or
(b) Presentment is excused and the instrument is
overdue and unpaid.

Sec. 84. Liability of person secondarily liable, when


instrument dishonored. - Subject to the provisions of this
Act, when the instrument is dishonored by non-payment, an
immediate right of recourse to all parties secondarily liable
thereon accrues to the holder.

2. Is presentment for payment necessary? It is not


necessary to charge the party primarily liable to pay but
it is necessary to charge the parties secondarily liable.

3. Are all instruments necessary to be presented for


payment? Yes, it is applicable to both PN and BOE in
order to charge persons secondarily liable

4. The liability of the person primarily liable is always


there the moment the instrument is issued. But then
again, the instrument has a maturity date. If you fail
to present the instrument for payment upon its
maturity, will the person primarily liable who has
not paid be held in default? No, the party primarily
liable cannot be considered in default because then he
would not know to whom he will make payment to. It is
only after there is such presentment and he did not pay
that there is default. Not being in default, he cannot be
liable for interests for delay.

Presentment for payment in this case is like a demand


in OBLICON. If you do not demand, then the person
cannot be considered in delay and you can never get
the fulfillment of the obligation. However, the liability of
the party primarily liable still exists; it’s just that he is not
considered in default.

Sec. 72. What constitutes a sufficient presentment. -


Presentment for payment, to be sufficient, must be made
(a) By the holder, or by some person authorized to
receive payment on his behalf;
(b) At a reasonable hour on a business day;
(c) At a proper place as herein defined;
(d) To the person primarily liable on the instrument, or
if he is absent or inaccessible, to any person found
at the place where the presentment is made.

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5. Sec 71—we have already discussed this. We made (c) Where no place of payment is specified and no
a distinction if PN and BOE. Let’s just move on to address is given and the instrument is presented at
how do you make presentment for payment? It the usual place of business or residence of the
should be made by the holder or his authorized person to make payment;
representative at a reasonable hour on a business day (d) In any other case if presented to the person to make
at a proper place herein defined to the person primarily payment wherever he can be found, or if presented
liable or if he is absent or inaccessible, to any person at his last known place of business or residence.
found at a place where presentment is made
Clarification: The holder or his authorized
Sec. 71. Presentment where instrument is not payable on representative must be the one to present the
demand and where payable on demand. - Where the instrument for payment. Of course, kailangan ug
instrument is not payable on demand, presentment must be authority if presentment for payment kay if you
made on the day it falls due. Where it is payable on demand, present for payment, ig exhibit nimo sa instrument,
presentment must be made within a reasonable time after its do you think mubayad ang party primarily liable nya
issue, except that in the case of a bill of exchange, di ka authorized?
presentment for payment will be sufficient if made within a
reasonable time after the last negotiation thereof. The one who will be on the other end of such
presentment, however does not need to be the one
6. Example of Demand Instrument—“To: A. Pay B or primarily liable since in his absence when the
order P10k. Sgd. C” When are you supposed to instrument is presented, it may be presented to
present this instrument? B should present this for anyone who is of legal age found in the place where
payment to A within a reasonable time after the last it is presented.
negotiation since this is a demand instrument which is
a BOE. How about “proper place”?

7. Supposing that reasonable time was made on (1) Where a place of payment is specified in the
Saturday, valid or not? It is valid since it is a demand instrument and it is there presented;
instrument, but it can only be presented up to 12 noon
if Saturday is not a holiday but it can also be presented Example: If the place of payment is specifically
for payment on the next business day. given. It must be a specific address and you
present it for payment there. OW, you would
8. What does “reasonable hour on a business day” have to follow the next priority.
mean? It means the usual operating hours of the
business. It depends on the business hours of the (2) Where no place of payment is specified but the
establishment where PFP will be made. address of the person to make payment is given in
the instrument and it is there presented;
What constitutes business hours depends upon the
general custom of the place where transaction took The “address” referred to here is not his place
place. of residence

9. What if it is a Call Center that operates for 24 hours? (3) Where no place of payment is specified and no
Do you still have up to 12 noon to present this? Yes, address is given and the instrument is presented at
the law expressly provides so (the law does not the usual place of business or residence of the
distinguish as to what kind of business). person to make payment;

Although “reasonable hour on a business day” means (4) In any other case if presented to the person to
that it depends on the business hours of the make payment wherever he can be found, or if
establishment, still the law provides that if it is made on presented at his last known place of business or
a Saturday, the holder only has the option to present it residence.
for payment until 12 noon. Bahala 24/7 ang business,
the law makes a restriction that it does not consider 10. Is that in order of priority? Yes, the order of
Sunday as a business day or that if it is to be presented enumeration must be followed. Otherwise, presentment
for payment on Saturday, it should only be up to 12 is improperly done or deemed irregular. Only when the
noon. It did not contemplate a business that is open for succeeding “proper places” are not available that you
24/7. can go to the next option provided

For other days though, “reasonable hour” would mean Sec. 74. Instrument must be exhibited. - The instrument
any hour if the business operates 24/7. Sunday, must be exhibited to the person from whom payment is
Saturday and holiday lang ang gi-distiguish ni Sir (not demanded, and when it is paid, must be delivered up to the
sure). party paying it.

Sec. 73. Place of presentment. - Presentment for payment is 11. Is it required that the instrument has to be there if
made at the proper place you present it for payment? Yes, the bill or note must
(a) Where a place of payment is specified in the be shown to the drawee or maker upon PFP
instrument and it is there presented;
(b) Where no place of payment is specified but the 12. If the PFP is made through a telephone call, is that
address of the person to make payment is given in valid? No, in that case, you cannot present the bill or
the instrument and it is there presented; note upon presentment

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13. What if through a teleconference? Still not allowed. October 19, 2018
the law did not contemplate video-conferencing and
therefore still not a valid means of exhibition. The Sec. 85. Time of maturity. - Every negotiable instrument is
note/bill does not only need to be exhibited but also payable at the time fixed therein without grace. When the
delivered to the party primarily liable day of maturity falls upon Sunday or a holiday, the
instruments falling due or becoming payable on Saturday
PFP must be accompanied by an exhibition of the bill or are to be presented for payment on the next succeeding
note. This is to enable the debtor to determine the business day except that instruments payable on demand
genuineness of the instrument and the indorsements may, at the option of the holder, be presented for payment
and the right of the holder to receive payment; and before twelve o'clock noon on Saturday when that entire day
enable him, upon payment, to take possession of it to is not a holiday.
guard against a lawsuit by a subsequent holder. This is
to prevent a situation where the bill/note had already 1. If the instrument is not a demand instrument and its
been paid and such instrument will not be renegotiated date of maturity falls on a Sunday, holiday or
again. It is to be delivered to the debtor as proof of the Saturday, when should it be presented for
payment payment?

Sec. 75. Presentment where instrument payable at bank. - In all instances, the instrument must be presented for
Where the instrument is payable at a bank, presentment for payment on the date that it matures and here, we
payment must be made during banking hours, unless the distinguish on what kind of instrument (whether it is a
person to make payment has no funds there to meet it at any demand instrument or a time instrument)
time during the day, in which case presentment at any hour
before the bank is closed on that day is sufficient. If the time of maturity falls on a (1) Sunday or a holiday,
or (2) a Saturday and it is not a demand instrument, it
14. If the instrument is to be presented at the bank, should be presented for payment on the next business
what are the rules? day.

If the person to make payment has sufficient When it falls on a Saturday and it is a demand
funds—during usual banking hours. Otherwise, the instrument, the holder now has an option to present it
parties secondarily liable are discharged for payment before 12 noon on Saturday if not a holiday
or on the next business day. Remember, the demand
If the person to make payment does not have instrument must be presented for payment at a
funds—anytime before closing. However, you have to reasonable time after its issue for a PN or after its last
wait upon the end of the day because he might deposit negotiation for a BOE.
funds to cover the amount. The instance though is when
the debtor really says he does not have funds, you don’t The “option” here only becomes mandatory when it is
have to wait before closing because di man gihapon ka for presentment for acceptance. If the date of
bayran. presentment for acceptance falls on a Saturday which
is not a holiday, it MUST be made before 12 noon. By
However, in reality, you have to understand that you can the word “must”, you can see that the holder does not
only go in the bank during banking hours. So either way, have the option unlike when it is for presentment for
it still means banking hours, although the law makes a payment of a demand instrument and the maturity date
distinction. So when you answer the Bar exam, ayaw falls on a Saturday.
answer na ditso ra ka banking hours because same ra
gihapon ang import sa law. Just say “banking hours” if 2. What is considered “reasonable hour on a business
with sufficient funds or “before the bank closes” if day”? What constitutes business hours depends on the
without sufficient funds general custom of the place where the instrument is to
be presented for payment. “At a reasonable hour on a
business day” depends on the business hours of the
establishment where PFP is made.

If the business opens for 24 hours like a call center, a


reasonable hour would mean any time the business is
open or during the establishment’s business hours
where the presentment for payment is made. It should
be dependent on WHERE the instrument is to be
presented for payment, NOT on the person primarily
liable.

IMPORTANT: IT IS NOT DEPENDENT ON THE


PERSON PRIMARILY LIABLE, IT DEPENDS ON THE
PLACE WHERE THE INSTRUMENT HAS TO BE
PRESENTED FOR PAYMENT.
If the person primarily liable is absent or inaccessible,
then it can be presented for payment to any person
found at the place where presentment is made.

3. What are considered business days? Only


Mondays-Fridays. That’s why if the maturity date of a

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demand instrument falls on a Saturday, the holder has in the instrument and the personal representative even
an option to present it before 12 noon if not a holiday or with reasonable diligence cannot be found.
on the next business day. If it is not payable on demand
and the maturity date falls not on a business day (e.g. In presentment for acceptance, it was PERMISSIVE on
holiday, Sunday or Saturday), then it has to be the part of the holder to present it to the personal
presented on the next business day representative of the deceased but if you really want to
present it for acceptance even if the deceased is dead,
4. The instrument does not specify the place where it such must be to the personal representative.
is supposed to be paid. But, there in the instrument,
the place of business of the party primarily liable is Regardless of the fact that the party primarily liable is
given, can you present it there? Yes, provided the dead, it does not mean his obligation is extinguished
holder has followed the “order of proper place” provided the estate still has sufficient funds that’s why
considering wala’y place specified and no other address you still have the right to claim on the instrument
of the party primarily liable is stated in the instrument. following the procedure for payment.

5. 2 rights of the party primarily liable upon PFP: Sec. 77. Presentment to persons liable as partners. - Where
the persons primarily liable on the instrument are liable as
(1) exhibition of the instrument to ascertain the partners and no place of payment is specified, presentment
genuineness of the instrument, indorsements and for payment may be made to any one of them, even though
the right of the holder to receive payment there has been a dissolution of the firm.
(2) have the instrument be delivered so he can take
possession of it to prevent further negotiation Sec. 78. Presentment to joint debtors. - Where there are
resulting in an instance where he is made to pay several persons, not partners, primarily liable on the
again instrument and no place of payment is specified,
presentment must be made to them all.
Sec. 87. Rule where instrument payable at bank. - Where the
instrument is made payable at a bank, it is equivalent to an 10. If the “person primarily liable” are more than 1, do
order to the bank to pay the same for the account of the you have to present it to everyone?
principal debtor thereon.
General Rule: If there are more than one parties
6. Review on the Rules if the instrument is to be paid primarily liable, you present for payment to all of them
at the bank. Again, ang important ra here is distinguish
if the person liable to pay has sufficient funds or not, so Exception: One may be presented with the instrument
you can determine if you have to present it for payment for payment and it is deemed to have been presented
during banking hours or before the bank closes to all of them when:
(although in effect, same import ra na)
(1) They are partners
Sec. 76. Presentment where principal debtor is dead. - (2) One is authorized to receive it in behalf of the
Where the person primarily liable on the instrument is dead others
and no place of payment is specified, presentment for
payment must be made to his personal representative, if Sec. 79. When presentment not required to charge the
such there be, and if, with the exercise of reasonable drawer. - Presentment for payment is not required in order
diligence, he can be found. to charge the drawer where he has no right to expect or
require that the drawee or acceptor will pay the instrument.
7. What if the person primarily liable is dead? Provided
there is NO place of payment specified, PFP must be Sec. 80. When presentment not required to charge the
made to his personal representative, if there be and he indorser. - Presentment is not required in order to charge an
can be found with the exercise of reasonable diligence indorser where the instrument was made or accepted for his
(Sec 76) accommodation and he has no reason to expect that the
instrument will be paid if presented.
8. If the person primarily liable is dead, the instrument
says that it is to be presented at the place of Sec. 81. When delay in making presentment is excused. -
residence of such person. When the holder Delay in making presentment for payment is excused when
presented it for payment at the place of residence the delay is caused by circumstances beyond the control of
of the deceased, the wife is there. However, the the holder and not imputable to his default, misconduct, or
personal representative is the son who was not negligence. When the cause of delay ceases to operate,
there. You presented it to the wife, is that regular? presentment must be made with reasonable diligence.
It is still a regular PFP. The rule that it must be
presented for payment to the deceased’s personal Sec. 82. When presentment for payment is excused. -
representative only applies when the instrument does Presentment for payment is excused
not specify a place of payment. Here, the instrument (a) Where, after the exercise of reasonable diligence,
specifies a place for payment, so it is Sec 72(d) that presentment, as required by this Act, cannot be
should apply. You just have to go to that place of made;
payment and whoever is there, you can just present it (b) Where the drawee is a fictitious person;
for payment to any person who is present. (c) By waiver of presentment, express or implied.

9. Can it not be excused at all? No, it cannot be excused.


It may only be excused if there was no place specified 11. Instances when presentment for payment is
excused.

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- If BOE:
(1) After the exercise of reasonable diligence, “To: A. Pay to the order of C P10k. Sgd. C”
presentment for payment cannot be made
The payee has to be the drawer. C will of course,
If you come to think of it, it was never excused have to issue the instrument to himself because he
because you did present the instrument for is also the payee. For him to issue it, there has to be
payment, it’s just that you cannot do it completely. an indorsement that is made by C also. The
In that case, the irregularity in the way by which you drawer/payee will present the instrument for
present it for payment in the sense that it cannot be acceptance to A who will accept it in accommodation
completed is excused. You don’t have to try again. of C. In this case, the holder does not need to
present it for payment to A/ drawee-acceptor in
(2) Drawee is a fictitious person order to charge C/drawer-indorser. PFP is not
necessary to charge C; after all, between C and A,
Example: “To: Superman. Pay to the order of A it is C (accommodated party) who is liable.
P10k. Sgd. B”
- If PN:
This instrument was negotiated: B—A—C—D— “I promise to pay A or order P10k. Sgd. B”
E
A was accommodated by B. B issued an instrument
Does E have to PFP? No need to present it for to A who will now negotiate it to someone else by
payment because the drawee is fictitious indorsement. The holder will not need to present it
for payment to B in order to charge A. After all,
What if the drawee was Jaime Zobel De Ayala (I between B and A, it is A who is liable on the
think gi-presuppose dinhi no relation at all instrument.
between the drawer and drawee kay sa
recording wa siya nimention), does E have to (Take note: Sec 81 was not discussed but if you read it, it’s
PFP? Note: Here, the drawee is not fictitious but a basically the same principle as when delay in presentment
real person who the drawer does not have any for acceptance is excused. Only the delay is excused, not
relation with. presentment itself)

If E fails to present it to De Ayala, will the parties Sec. 88. What constitutes payment in due course. - Payment
secondarily liable be discharged? No, only the is made in due course when it is made at or after the maturity
the indorsers are discharged. The drawer is still of the payment to the holder thereof in good faith and
liable to pay. You need not PFP the instrument to without notice that his title is defective
charge the drawer where he has no expectation to
believe it will be paid. 13. When is there payment in due course? Payment in
due course is:
Do you still have to PFP the instrument to a
drawee who is not fictitious but to whom the (1) Payment at or after the date of maturity of the
drawer has no expectation of payment? Yes, in instrument
order to charge the indorsers. Failure to PFP the (2) Payment made by the person liable (but instrument
instrument in this case will still charge the drawer is only discharged if payment in due course is by
but will discharge the indorsers. the person primarily liable)
(3) Payment must be made to the holder
Rules: (4) Payment must be made in good faith and without
1. If the drawee is fictitious—no need to PFP notice that the holder’s title is defective
(so failure to PFP will still charge the parties
secondarily liable) Important:
Payment in due course can be made by anyone liable
2. If the drawee is a real person but to whom to the instrument for as long as such payment is made
the drawer does not expect payment from to a holder in due course. It is payment in good faith and
- No need to PFP to charge the drawer (so without notice that the holder’s title is defective.
failure to PFP will still charge the drawer)
HOWEVER, that is not the payment in due course that
- Need to PFP to charge the indorsers (so may cause the discharge of the instrument. Only
failure to PFP will discharge the indorsers) payment in due course by the person primarily liable
may cause a discharge on the instrument.
(3) Waiver of presentment for payment

12. Illustrate Sec. 80

Here, there is mention of an indorser accommodated by


the maker or drawee. The payee has to be the
accommodated party while the person primarily liable is
the accommodation party. The rule after all is that
between the accommodation party and the
accommodated party, it is the accommodated party who
is liable.

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October 30, 2018 E, the holder, has to give a notice of dishonor to B, C
and D. If he fails to give, the party not given a notice of
Sec. 89. To whom notice of dishonor must be given. - Except dishonor (not necessarily by E), will be discharged from
as herein otherwise provided, when a negotiable instrument liability.
has been dishonored by non-acceptance or non-payment,
notice of dishonor must be given to the drawer and to each Granting E only gave a notice of dishonor to D alone, B
indorser, and any drawer or indorser to whom such notice and C will be discharged from liability ONLY IF D also
is not given is discharged. does not give a notice of dishonor to B and C. B and C
then would not be automatically discharged from liability
1. Who is supposed to be given a notice of dishonor? since D, who was given a notice of dishonor by E can
The parties secondarily liable on the instrument— still in turn, give a notice of dishonor to B and C (D’s
indorsers and drawer. Otherwise, those not given will be prior parties).
discharged from their liability to pay the instrument, but
will still remain to be liable for any breach of the Since D can still give a notice of dishonor to prior
warranties they made parties, these prior parties will not be discharged from
liability. The notice of dishonor given by D to B and C
2. Only persons secondarily liable are required to be would benefit E (Sec 93). It is wrong to say that just
given a notice of dishonor. What is the effect if they because no notice of dishonor to B and C, they are
are not given? It discharges the liability of these deemed discharged as regards E because the notice by
persons secondarily liable. You can still go after them D would benefit E. B and C would then not be
for purposes of enforcing payment on the instrument. considered discharged from their liability to E.

The law seems to be specific in simply saying drawers As a holder, you have the option to give the notice of
and indorsers. There really is no mention of persons dishonor to just one prior party and hope that he will give
negotiating by delivery (PNBD) but it should not be a notice of dishonor to parties prior him because then,
understood to mean that PNBD need not be given a their liability will still be preserved. Of course, it is more
notice of dishonor just so their liability will be preserved. prudent to give a notice of dishonor to all prior parties
They ought to be given still a notice of dishonor but so that he can be assured that their liabilities will be
again, you will only give it to the person from whom you preserved, because for all you know, the party you gave
received the instrument. The reason why is because a notice of dishonor to would not even bother to give a
you would not know any other party other than him. If notice of dishonor to the parties prior him.
you look at that instrument, you would not know who the
parties are because there would be no details presented The legal basis that the notice given by D to B and C
at the back. But, if ever it is a bearer instrument and inures to the benefit of E is found in Section 93 that tells
there happen to be indorsements at the back, you may us whoever is the person who is compelled to make
be required to give a notice of dishonor to these payment gave a notice of dishonor to prior parties, such
persons. But, again it goes without saying that you only notice inures to the benefit of the person subsequent to
give it to the parties/ indorsers to whom you can trace him. There is no mention of subsequent holder in Sec
your title to. Otherwise, you will not be able to compel 93 because it does not contemplate a subsequent
them to pay. holder. In this case, there is no subsequent holder
reflected, you only have a holder.
Sec. 90. By whom given. - The notice may be given by or on
behalf of the holder, or by or on behalf of any party to the 5. Why can D give a notice of dishonor? Because he is
instrument who might be compelled to pay it to the holder, a party who is compelled to make payment to the holder
and who, upon taking it up, would have a right to and can ask reimbursement from the party whom the
reimbursement from the party to whom the notice is given. notice is given.

Sec. 93. Effect where notice is given by party entitled The legal basis of D to give a notice of dishonor is found
thereto. - Where notice is given by or on behalf of a party in Sec 90 because it includes the person who may be
entitled to give notice, it inures to the benefit of the holder compelled to pay the holder and would have a right of
and all parties subsequent to the party to whom notice is reimbursement from the party to whom the notice is
given. given. In this case, E gave a notice of dishonor to D—
that means that D is compelled to pay E; in turn, D can
3. Who should give a notice of dishonor? give a notice of dishonor to B and C because it is from
(1) Holder or his agent them D can ask for reimbursement from whatever he
(2) Person who may be compelled to pay the holder has paid to E.
(3) Person who, upon taking it up, will have a right of
reimbursement from the party to whom the notice Sec. 92. Effect of notice on behalf of holder. - Where notice
is given is given by or on behalf of the holder, it inures to the benefit
of all subsequent holders and all prior parties who have a
4. Illustration. right of recourse against the party to whom it is given.

A is the maker of the instrument (promissory note). The 6. Illustrate Sec 92.
negotiation is as follows: A—B—C—D—E.
It contemplates a situation where the instrument has
E must PFP to A. A refused to pay so the instrument is already been dishonored. A notice of dishonor has been
considered dishonored by non-payment. given to parties but the current holder further negotiates
the dishonored instrument. This contemplates a BOE
dishonored by non-acceptance not a PN because

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dishonor in the promissory note would mean that it was give notice to his principal. If he gives notice to his principal,
not paid at maturity and therefore, overdue. When you he must do so within the same time as if he were the holder,
further negotiate a dishonored PN/ overdue, any and the principal, upon the receipt of such notice, has
subsequent holder who accepts it cannot be considered himself the same time for giving notice as if the agent had
as a HIDC (see requisites of HIDC in Sec 52). been an independent holder.

Example: A (drawer) drew a BOE in favor of C (payee) 9. What are the agent’s available options when it was
addressed to B (drawee). The negotiation is as follows: in his hands that the instrument was dishonored?
C—D—E—F. F presented it for acceptance to B who
dishonored it. Either:
(1) Notify his principal; OR
F gave a notice of dishonor to E. E, in turn gave a notice (2) Directly notify the parties to the instrument
of dishonor to A, C and D. After giving a notice of
dishonor to E, F did not wait for any payment by the prior 10. How long a period is given to an agent? The same
parties. He instead decided to negotiate it because time period provided in Sec 103 and 104 which is 24
upon negotiating to a subsequent holder, F would hours. The agent is granted 24 hours within which to
receive value for the instrument. It was given to G—H. give the notice of dishonor either to his principal or to
the parties to the instrument.
A (drawer)—C—D—E—F—G—H
Effect:
B (drawee) (1) Agent notifies principal—principal will have another
fresh period of 24 hours from the time he was
H presented the instrument to B for acceptance but, B notified about the dishonor by the agent, to give a
still dishonored it. H need not send a notice of dishonor notice of dishonor to parties to the instrument
to all prior parties EXCEPT G because the notice of
dishonor that had been received by A, C, D and E (2) Agent notifies parties to the instrument—agent has
already inures to the benefit of the subsequent holders. 24 hours from the time he knew about the dishonor
In fact, when H gave a notice of dishonor to G, G need to notify the parties
not also give a notice of dishonor at all. Whatever
notices that may have been received by any of the prior 11. What option do you think is more beneficial? If you
parties would already benefit all of them. want to be smart, better for the agent to inform the
principal first so that the principal will have another 24
How about F? Is he entitled to receive a notice of hours within which to give notices of dishonor to the
dishonor? He need not be given a notice of dishonor parties to the instrument
since he himself already knew about the dishonor. It
was in his hands that the instrument was dishonored Sec. 97. To whom notice may be given. - Notice of dishonor
previously. may be given either to the party himself or to his agent in
that behalf.
7. Reason why notice of dishonor received by a prior
party inures to the benefit of subsequent holders. 12. We know who can give a notice of dishonor. Who
One notice is enough, because it only takes one notice can receive the notice of dishonor?
to apprise the party about the dishonor. Any person
secondarily liable need receive only one notice of (1) Persons secondarily liable—drawer and indorsers
dishonor because that would suffice to inform him that (2) Authorized agent of the party secondarily liable
his secondary liability now arises. That is why the law
deems it that if all the prior parties have received a 13. Is there a difference on the agency required when it
notice of dishonor already, they need not be given is received by the agent of the party? You must be a
another notice. But, of course, nothing also stops the duly authorized agent to be able to receive a notice of
person to give another notice of dishonor to parties dishonor on behalf of the party secondarily liable.
already given the notice Otherwise, that notice will not be given any effect and
the person supposedly being represented will be
Sec. 91. Notice given by agent. - Notice of dishonor may be deemed discharged from his or her liability.
given by any agent either in his own name or in the name of
any party entitled to given notice, whether that party be his The person who gave the notice of dishonor must then
principal or not. ascertain that the person receiving is duly authorized to
represent the party secondarily liable.
8. Is it possible that a third person give a notice of
dishonor? Yes, in case he is an agent of the holder or The reason for the distinction is that the receipt of the
an agent of the person who may be compelled to make notice of dishonor creates a liability. However, the giving
payment. Notice of dishonor may be given by any agent of the notice of dishonor inures to the benefit of the party
EITHER in his own name or in the name of any party that it is given for.
entitled to give notice. There is no required form of
agency. Any person can make a representation that he Sec. 95. When notice sufficient. - A written notice need not
represents a party to the instrument and he will be the be signed and an insufficient written notice may be
one to give a notice of dishonor. supplemented and validated by verbal communication. A
misdescription of the instrument does not vitiate the notice
Sec. 94. When agent may give notice. - Where the instrument unless the party to whom the notice is given is in fact misled
has been dishonored in the hands of an agent, he may either thereby.
himself give notice to the parties liable thereon, or he may

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Sec. 96. Form of notice. - The notice may be in writing or then you just mail it to the last known place of business
merely oral and may be given in any terms which sufficiently or residence of the deceased
identify the instrument, and indicate that it has been
dishonored by non-acceptance or non-payment. It may in all If his death is not known, you just give it in the usual
cases be given by delivering it personally or through the course of giving of the notice of dishonor.
mails.
Sec. 99. Notice to partners. - Where the parties to be notified
14. Is there a required form for the notice of dishonor? are partners, notice to any one partner is notice to the firm,
No required form because it may be written or oral. even though there has been a dissolution.
However, there are certain details supposed to be
presented by the notice for it to be considered a valid 17. What if the parties are partners? Notice of dishonor
notice. to any one partner is notice to the firm, even though
there had been a dissolution
If you come to think about it, it has to be written for you
to prove that a notice of dishonor was given because it Sec. 100. Notice to persons jointly liable. - Notice to joint
might become your word against theirs if there is no persons who are not partners must be given to each of them
proof that the notice actually given. However, the law is unless one of them has authority to receive such notice for
still clear that the notice may be written or oral, but what the others.
it actually tries to say is that as much as possible, write
a notice of dishonor, just supplement it with oral 18. What if the parties are not partners as when they are
communication if you think there are details missing in jointly liable only? Notice of dishonor must be given to
the written notice each of them UNLESS one is authorized to represent
the other.
15. Contents of the notice of dishonor.

(1) The instrument has to be identified and described.

Otherwise, it may mislead the persons secondarily


liable on their liability since there are a lot of
negotiable instruments circulating.

(2) Circumstances leading to the dishonor of the


instrument.

Example: Probably you will mention that “PN No.


123 matures on October 30, 2018; that the
undersigned has duly presented the instrument for
payment to Mr. X in his residence at 9am of the
same date; that Mr. X refused payment and so the
instrument is hereby deemed dishonored; that
demand is hereby made against your person to
make good the promise made under the above-
named PN” Then, the party signs the notice.

(3) Demand made to the party being given the notice


to make payment (statement that the party giving
notice intends to look to the party addressed for
payment)

That’s why if oral, it would be very convenient for the


party secondarily liable to say that the holder/party
giving notice did not convey to him the details of the
dishonor of the instrument. Ideally, while there is no
required form, you give a written notice of dishonor.

Sec. 98. Notice where party is dead. - When any party is dead
and his death is known to the party giving notice, the notice
must be given to a personal representative, if there be one,
and if with reasonable diligence, he can be found. If there be
no personal representative, notice may be sent to the last
residence or last place of business of the deceased.

16. What if the person to be given the notice of


dishonor is already dead, does that excuse the
giving of the notice of dishonor? No, it does not
excuse the giving of the notice of dishonor. You’re
supposed to give it to the personal representative of the
deceased ONLY if his death is known. If the personal
representative cannot be located with due diligence,

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November 5, 2018 the instrument is given to the party to whom the notice
is given (Sec 96).
1. If the agent of the holder or the holder gives the
notice, to whose benefit will it inure? It will inure to Sec. 103. Where parties reside in same place. - Where the
the benefit of all subsequent holders and all parties prior person giving and the person to receive notice reside in the
to the holder but subsequent to the party who was given same place, notice must be given within the following times:
the notice of dishonor (Sec 92) (a) If given at the place of business of the person to
receive notice, it must be given before the close of
2. If the notice is given by the person who is business hours on the day following.
compelled to pay the holder to the party with whom (b) If given at his residence, it must be given before the
he has a right of reimbursement from or his agent, usual hours of rest on the day following.
to whose benefit will it inure? It inures to the benefit (c) If sent by mail, it must be deposited in the post
of the holder and all parties subsequent to the party who office in time to reach him in usual course on the
has received the notice (Sec 93). day following.

In short, it’s always the parties subsequent to the person 6. If the parties are residing in the same place, when is
who has received a notice of dishonor who gets to be the reckoning point for the period of giving notice?
benefited because after all, once a notice is given, one Reckoned from the time of dishonor. The notice must
notice is enough to apprise him of the fact of dishonor. be given to the party secondarily liable within 24 hours
or on the “day following” from the dishonor.
3. Emphasis on Sec 92 and 93
However, the time period may not be the full 24 hours
Negotiation: A—B—C—D—E. If E gave a notice of since there is a limit as to the time within which to give
dishonor to B, such notice will benefit C and D, the the notice of dishonor:
parties subsequent to the party who received the notice.
(1) At the place of business—given before the close
If E further negotiates it to F, supposedly, C and D will of business hours the day following
be discharged from their liability to E, but it will not (2) At the residence—given before the usual hours of
prejudice the rights of F (F being a HIDC who did not rest on the day following
have any notice of the previous dishonor). (3) If sent by mail—deposited in the post office in time
to reach him in usual course on the day following
If F gave notices of dishonor to C and D, C and D do not
need to give a notice of dishonor to B because B had Sec. 104. Where parties reside in different places. - Where
already been given a notice of dishonor previously by the person giving and the person to receive notice reside in
E. Such notice by E already inured to the benefit of C different places, the notice must be given within the
and D. following times:
(a) If sent by mail, it must be deposited in the post
Sec 92 and 93 merely distinguish when a notice of office in time to go by mail the day following the day
dishonor is given by the holder (Sec 92) or when the of dishonor, or if there be no mail at a convenient
notice of dishonor is given by a person compelled to pay hour on last day, by the next mail thereafter.
the holder and who has a right of reimbursement from (b) If given otherwise than through the post office, then
the party given the notice to (Sec 93). However, the within the time that notice would have been
effect is just the same. The notice will always inure to received in due course of mail, if it had been
the benefit of subsequent parties from the one given the deposited in the post office within the time specified
notice of dishonor. in the last subdivision.

Sec. 101. Notice to bankrupt. - Where a party has been 7. If they are residing in different places? The
adjudged a bankrupt or an insolvent, or has made an supposition is that you just send it by mail ordinarily.
assignment for the benefit of creditors, notice may be given Mail referred to here is the “snail mail” but you can also
either to the party himself or to his trustee or assignee. consider private courier which is faster

4. What if the person is a adjudged bankrupt or (1) Sent by mail—deposited in the post office in time
insolvent or has made an assignment for his to go by mail the day following the day of dishonor,
creditors, to whom will you give the notice of OR if there be no mail at a convenient hour on last
dishonor? To the (1) party himself, or (2) his trustee or day, by the next mail thereafter
assignee
“go by mail”—not necessarily that it is received the
Sec. 96. Form of notice. - The notice may be in writing or day following but only that it is due for delivery the
merely oral and may be given in any terms which sufficiently day following
identify the instrument, and indicate that it has been
dishonored by non-acceptance or non-payment. It may in all (2) Given otherwise than through mail—given within
cases be given by delivering it personally or through the the time the notice would have been received in
mails due course of mail if it had been deposited under
Sec 104(a)
5. Can the notice be given through mail? Yes, it can be
given personally or through mail, provided that the Example: If I give the notice by mail today and
instrument is sufficiently described, the facts of its ordinarily, it would have been received 5 days after
dishonor are stated and a demand for the payment of then if the notice is sent otherwise than through

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mail, the notice should reach the party after 5 days What is sojourning? Vacationing; where he is
or had it been sent through mail vacationing

Sec. 106. Deposit in post office; what constitutes. - Notice is These are very procedural—you’re supposed to follow,
deemed to have been deposited in the post-office when otherwise, it is deemed that the notice of dishonor is not
deposited in any branch post office or in any letter box given.
under the control of the post-office department.
Sec. 109. Waiver of notice. - Notice of dishonor may be
8. What constitutes deposit in a post office? It includes waived either before the time of giving notice has arrived or
deposit in the (1) post office or (2) branch post office or after the omission to give due notice, and the waiver may be
(3) any letter box under the control of the post office expressed or implied
department
12. Can the notice be waived? Yes, it can be waived
Sec. 105. When sender deemed to have given due notice. - expressly or impliedly, which may come either before
Where notice of dishonor is duly addressed and deposited the time of giving notice has arrived or after the
in the post office, the sender is deemed to have given due omission to give due notice
notice, notwithstanding any miscarriage in the mails.
Sec. 110. Whom affected by waiver. - Where the waiver is
9. Does it matter that the mails are not actually embodied in the instrument itself, it is binding upon all
received by the person supposed to receive it parties; but, where it is written above the signature of an
because of miscarriage of mails? For as long as the indorser, it binds him only.
notice is duly addressed and deposited, that would
suffice as giving notice already. It doesn’t matter 13. Where can notice of dishonor be waived? It can be
whether the notice is actually received by the person waived on the face of the instrument itself or through the
who is supposed to receive it. What is important is that indorsement. If the waiver is on the face of the
you gave a notice—it is deemed giving notice by mail instrument, it will bind all the parties to the instrument.
when it is duly addressed and deposited. You do not need to give a notice of dishonor. If the
waiver is just on the indorsement, then it is only binding
Sec. 107. Notice to subsequent party; time of. - Where a on the indorser who made such waiver. In that case, you
party receives notice of dishonor, he has, after the receipt of do not need to give a notice of dishonor to such indorser
such notice, the same time for giving notice to antecedent to preserve his liability
parties that the holder has after the dishonor.
14. What do you call that indorsement where there is a
10. How long a time is given to the person who received waiver of right? Facultative indorsement. Where the
a notice of dishonor who may give a notice of indorsement waives ANY right, it is called a facultative
dishonor to any prior party before him? He is given indorsement
a fresh period of 24 hours from the time he received a
notice of dishonor to give a notice of dishonor to the Sec. 111. Waiver of protest. - A waiver of protest, whether in
party to whom he has a right of reimbursement to. the case of a foreign bill of exchange or other negotiable
instrument, is deemed to be a waiver not only of a formal
Sec. 108. Where notice must be sent. - Where a party has protest but also of presentment and notice of dishonor.
added an address to his signature, notice of dishonor must
be sent to that address; but if he has not given such address, 15. If there is waiver of protest, what is the effect?
then the notice must be sent as follows: Presentment and notice of dishonor are waived,
(a) Either to the post-office nearest to his place of because protest is a formal procedure than the usual
residence or to the post-office where he is notice of dishonor. When you then waive a protest, then
accustomed to receive his letters; or it’s like you’re also waiving all the steps accompanying
(b) If he lives in one place and has his place of business dishonor to charge a party secondarily liable.
in another, notice may be sent to either place; or
(c) If he is sojourning in another place, notice may be Sec. 112. When notice is dispensed with. - Notice of
sent to the place where he is so sojourning. dishonor is dispensed with when, after the exercise of
But where the notice is actually received by the party within reasonable diligence, it cannot be given to or does not reach
the time specified in this Act, it will be sufficient, though not the parties sought to be charged
sent in accordance with the requirement of this section
16. When can notice be dispensed with? When the
11. Where must you send the notice? notice of dishonor cannot be given to or does not reach
the parties sought to be charged despite the exercise of
(1) If there is an address given in the instrument, that reasonable diligence. You must prove that you tried to
address is where it must be sent give the notice of dishonor and that despite your best
(2) If there is no address given then: efforts, it cannot be received by the person to whom it
a. Either to the post office nearest to his place of is sent. In this case, those parties who did not receive
residence or to the post office where he is the notice of dishonor are not discharged
accustomed to receive his letters
b. If he lives in one place and has his place of Sec. 113. Delay in giving notice; how excused. - Delay in
business in another, notice may be sent to giving notice of dishonor is excused when the delay is
either; or caused by circumstances beyond the control of the holder
c. Place where the party is sojourning and not imputable to his default, misconduct, or negligence.
When the cause of delay ceases to operate, notice must be
given with reasonable diligence.

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(a) When the drawee is a fictitious person or person not
17. What about if only the delay in giving the notice is having capacity to contract, and the indorser was
excused? When the delay in giving the notice is caused aware of that fact at the time he indorsed the
by circumstances beyond the control of the person who instrument;
is supposed to give notice (e.g. when there is a typhoon (b) Where the indorser is the person to whom the
or a state of war) and not imputable to his fault that instrument is presented for payment;
prevents him from giving the notice in due course, then (c) Where the instrument was made or accepted for his
the giving of the notice is not really dispensed with. accommodation
What is waived is only the delay in the giving of the
notice. After the circumstances have ceased, you are 19. When is it not required to give a notice of dishonor
supposed to give the notice of dishonor already to the indorser?

Sec. 114. When notice need not be given to drawer. - Notice (1) When the drawee is fictitious or does not have
of dishonor is not required to be given to the drawer in either the capacity to contract and the indorser
of the following cases: knew—Indorser MUST be aware which is not
(a) Where the drawer and drawee are the same person; provided for the drawer. Reason for the difference
(b) When the drawee is fictitious person or a person not is that the drawer when he drew the instrument
having capacity to contract; really knew that the drawee is fictitious or does not
(c) When the drawer is the person to whom the have capacity to contract as a fact. If you’re just an
instrument is presented for payment; indorser, it’s not necessary that you knew it. If you
(d) Where the drawer has no right to expect or require did know about it, then you are not entitled to a
that the drawee or acceptor will honor the notice of dishonor
instrument;
(e) Where the drawer has countermanded payment. (2) When the indorser is to whom the instrument is
presented for payment—it happens when the
18. When is it not necessary to give a notice of indorser happens to be the drawee or maker of the
dishonor to the drawer? Basically when the drawer instrument. The drawee/maker and the indorser
knows in the first place that the instrument will already are one and the same person; that’s why he is the
be dishonored—that’s why there’s no need to give him person to whom the instrument is presented for
a notice of dishonor payment

(1) Drawer and drawee are the same person—the (3) When the instrument was made or accepted for
instrument may be regarded as a PN by the holder. his accommodation
The drawer here is basically the same person who
would dishonor the instrument. When the Sec. 116. Notice of non-payment where acceptance refused.
instrument would be dishonored, he would - Where due notice of dishonor by non-acceptance has been
automatically know about the dishonor. After all, he given, notice of a subsequent dishonor by non-payment is
was the one who caused the dishonor not necessary unless in the meantime the instrument has
been accepted.
(2) When the drawee is fictitious or does not have
the capacity to contract—instrument may still be 20. Where there is a dishonor by non-acceptance, is
regarded as a PN by the holder. Upon making the there a need to give a notice of dishonor by non-
instrument, the drawer already knew that the payment?
drawee would not have any capacity to accept it.
The drawer would already know that the instrument General Rule: No need to give a notice of dishonor by
would be dishonored. The drawer cannot benefit non-payment (provided, there was already a notice of
from his own wrongdoing. dishonor by non-acceptance that was given)

(3) When the drawer is the person to whom the Exception: If in the meantime, the instrument was
instrument is presented for payment—It accepted after it was dishonored by non-acceptance
happens when the drawer is the accommodated previously.
party. The drawee merely accepted the instrument
in accommodation for the drawer. Example: When the instrument was presented for
acceptance initially, the instrument was not accepted. It
(4) When the drawer has no right to expect that was further negotiated, however. When the instrument
instrument will be honored or accepted—when was presented again for acceptance, this time it was
there is no prior arrangement made with the accepted. In that case, you still need to give a notice of
drawee dishonor by non-payment since the instrument has
been accepted already
(5) When the drawer countermanded payment—
drawer issued a stop-payment order. The Sec. 117. Effect of omission to give notice of non-
instrument will not be paid anymore. In that case, acceptance. - An omission to give notice of dishonor by non-
he would know that the instrument will be acceptance does not prejudice the rights of a holder in due
dishonored course subsequent to the omission.

Sec. 115. When notice need not be given to indorser. — 21. What is the effect of the omission to give a notice of
Notice of dishonor is not required to be given to an indorser dishonor? it will discharge parties secondarily liable
in either of the following cases: who were not given such notice but will not prejudice
rights of HIDC subsequent to the omission

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(b) The fact that presentment was made and the
22. Will that prejudice the parties subsequent to the manner thereof;
party who failed to give a notice of dishonor? No, it (c) The cause or reason for protesting the bill;
will not prejudice the subsequent parties, provided they (d) The demand made and the answer given, if any, or
are HIDC. the fact that the drawee or acceptor could not be
found
Example: The instrument has been dishonored by non-
acceptance, then later on, it was further negotiated. How do you do a protest? Sec 153 tells about the contents of
Parties subsequent to the person who did not give a the protest but De Leon detailed how it is supposed to be done.
notice of dishonor by non-acceptance cannot be
prejudiced by the failure of such party to give the notice. Once the instrument has been dishonored, you go to the notary
He is also given a right to give a notice of dishonor to public bringing with you the dishonored instrument. The notary
the prior parties. public is supposed to present it again either for payment or
acceptance. When it is dishonored in his hands, the notary public
Sec. 118. When protest need not be made; when must be then makes a notation on the day it was dishonored. Better if he
made. - Where any negotiable instrument has been can write all the needed facts provided under Sec 153 but it need
dishonored, it may be protested for non-acceptance or non- not be a final draft yet. He will just make some notations. The
payment, as the case may be; but protest is not required final draft can be provided after the notation happened. What is
except in the case of foreign bills of exchange. important is that on the day the instrument was dishonored,
noting happened. After noting, the notary public sends notices of
23. When is protest not necessary? All inland bills of dishonor to the parties secondarily liable in order not to discharge
exchange and even promissory notes need not be them
protested
Sec. 154. Protest, by whom made. - Protest may be made by:
PROTEST (a) A notary public; or
(b) By any respectable resident of the place where the
As you’ve noticed, Protest just copied the provisions pertaining bill is dishonored, in the presence of two or more
to the Notice of Dishonor. That’s just because a protest is really credible witnesses
just a formal form of notice of dishonor. What is important about
protest is really the procedure in how the protest is conducted. Is it necessary that the notary public be the one to present
it? Nowadays, yes because there is no such respectable person
Sec. 152. In what cases protest necessary. - Where a foreign anymore.. shet hahaha
bill appearing on its face to be such is dishonored by non-
acceptance, it must be duly protested for non-acceptance, Supposedly, any respectable resident of the place where it was
by non-acceptance is dishonored and where such a bill dishonored in the presence of 2 or more credible witnesses can
which has not previously been dishonored by nonpayment, present. However, you have to prove that such person really is
it must be duly protested for nonpayment. If it is not so respectable. It’s the practice before man gud where there are not
protested, the drawer and indorsers are discharged. Where a lot of notaries public in remote areas.
a bill does not appear on its face to be a foreign bill, protest
thereof in case of dishonor is unnecessary. Really, what you have to know is that once the instrument is
dishonored, the notary public or the respectable person is
What are the instruments required to be protested? Only a supposed to present the instrument again to confirm that the
foreign BOE. instrument is really dishonored, and only then will he make the
noting. The noting will have to happen on the day of dishonor
When is it a foreign bill? When one of the incidences of either BUT the actual certificate of it need not be issued on that day. It
payment or issuance is in a foreign country. could be issued on some other day.

What is the reason why these are required to be protested? Sec. 155. Protest; when to be made. - When a bill is
(1) To establish international practice and international protested, such protest must be made on the day of its
standards dishonor unless delay is excused as herein provided. When
(2) In order to give satisfaction to the person who may not a bill has been duly noted, the protest may be subsequently
know about the fact of dishonor in some other country extended as of the date of the noting.

At least, when it is duly authenticated by a notary public, Sec. 156. Protest; where made. - A bill must be protested at
then he would be appeased that the dishonor actually the place where it is dishonored, except that when a bill
happened. drawn payable at the place of business or residence of some
Does that mean that you cannot protest all other bills? No, person other than the drawee has been dishonored by non-
that’s not the implication. It’s just that other than a foreign bill of acceptance, it must be protested for non-payment at the
exchange, protest is not required. You can even protest a place where it is expressed to be payable, and no further
promissory note if you want to presentment for payment to, or demand on, the drawee is
necessary.
Why would you want to protest then? Perhaps, you want an
acceptor for honor or payment for honor. In those instances, it When are you supposed to make the protest? The protest
will require protest prior. begins when you go to the notary public and the notary public on
the same day it was dishonored, is supposed to present the
Sec. 153. Protest; how made. - The protest must be annexed instrument. That’s why it’s very important to establish where you
to the bill or must contain a copy thereof, and must be under are supposed to make the protest.
the hand and seal of the notary making it and must specify:
(a) The time and place of presentment;

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The reason why it has to be made at the place where it had been What if the bill was lost? The law says that protest must be
dishonored is because imagine, the notary public is supposed to made on a copy or written particulars thereof pero God bless
present it again on the same day it was dishonored. The law kung gi photocopy kaha na. Written particulars are the
deemed it necessary that if ever you need to protest, it should be description of the bill written on a document (who issued it, when
at the place where the instrument was dishonored to allow the it was issued, for how much it was issued, whether bearer or
notary public or such respectable person to go to the person order instrument; IOW, state the elements under Sec 1). The
primarily liable and confirm the fact of dishonor. written particulars will have to be attached to the certificate of
protest.
There is an exception to this rule however—when the instrument
was dishonored by non-acceptance at a place different from the Sec. 157. Protest both for non-acceptance and non-
place where it is payable. There are 2 protests remember— payment. - A bill which has been protested for non-
protest for non-acceptance, and protest for non-payment. acceptance may be subsequently protested for non-
payment.
RULE: Ordinarily, you will do a protest for non-acceptance if the
instrument was dishonored by non-acceptance or protest for non- After the instrument had been protested for non-
payment if the instrument was dishonored by non-payment; AND acceptance, do you have to protest it for non-payment? No,
such protest must be made where the instrument was the same way as in the rules of notice of dishonor. The exception
dishonored. However, when the instrument is dishonored by non- is the same, as well. You will still have to give a protest for non-
acceptance at a place different from the place where it is payable, payment when the instrument was accepted in the meantime
then you do the protest for non-payment at the place where the
instrument is supposed to be payable NOT a protest for non- ACCEPTANCE FOR HONOR
acceptance where it was dishonored by non-acceptance
Sec. 161. When bill may be accepted for honor. - When a bill
Example: The instrument is issued abroad to be presented for of exchange has been protested for dishonor by non-
acceptance in Cebu City but payable in Manila. It was dishonored acceptance or protested for better security and is not
by non-acceptance here in Cebu City, what you do is a protest overdue, any person not being a party already liable thereon
for non-payment in Manila (place where it is payable). may, with the consent of the holder, intervene and accept
the bill supra protest for the honor of any party liable
Sec. 158. Protest before maturity where acceptor insolvent. thereon or for the honor of the person for whose account the
- Where the acceptor has been adjudged a bankrupt or an bill is drawn. The acceptance for honor may be for part only
insolvent or has made an assignment for the benefit of of the sum for which the bill is drawn; and where there has
creditors before the bill matures, the holder may cause the been an acceptance for honor for one party, there may be a
bill to be protested for better security against the drawer and further acceptance by a different person for the honor of
indorsers. robles virtual law library another party.

Is it possible to protest an instrument even before it What is acceptance for honor? Otherwise called as
matures? When the person primarily liable has been adjudged acceptance supra protest. It is called such because it happens
insolvent, bankrupt or has made an assignment for the benefit of after protest (protested for non-acceptance or protested for better
his creditors. You protest for better security—it is called such security) has been made.
because the instrument has not really been dishonored for non-
acceptance or non-payment yet. Omission to protest for better IOW, this is not limited to foreign bills although the connotation is
security will not affect holder’s remedy against the parties that this should involve foreign bills because only foreign bills are
secondarily liable. It merely apprises the drawer and indorsers of required to be protested. But, remember that there is no
the situation of the acceptor that may make it improbable for him prohibition if a person wants to accept the instrument for the
or her to pay the instrument upon maturity honor of some other person. Therefore, what you do is that if the
instrument does not require to be protested, then you have to
Sec. 159. When protest dispensed with. - Protest is protest it if you want a person to become an acceptor for honor.
dispensed with by any circumstances which would
dispense with notice of dishonor. Delay in noting or What is actually the history behind this acceptance for honor and
protesting is excused when delay is caused by payment for honor is the intention to preserve the credit of the
circumstances beyond the control of the holder and not drawer. That’s why you will realize that in acceptance for honor,
imputable to his default, misconduct, or negligence. When it’s always for the honor of the drawer because that’s the history.
the cause of delay ceases to operate, the bill must be noted The moment there is dishonor of the instrument by non-
or protested with reasonable diligence. acceptance, the person whose reputation is tarnished is the
person who signed the instrument or the one who actually
Can you dispense with protest? Yes, the same way as when created the instrument in the first place. That’s why if you want to
you can dispense with notice of dishonor. preserve his or her good name, you may accept the instrument
in his or her honor. So in acceptance for honor, bisan na diay na
Can you excuse the delay of protest? Same circumstances as dishonor ang instrument, there is still a possible person you can
when you can excuse the delay for the notice of dishonor go after—the acceptor for honor.

Sec. 160. Protest where bill is lost and so forth. - When a bill Sec. 131. Referee in case of need. - The drawer of a bill and
is lost or destroyed or is wrongly detained from the person any indorser may insert thereon the name of a person to
entitled to hold it, protest may be made on a copy or written whom the holder may resort in case of need; that is to say,
particulars thereof. in case the bill is dishonored by non-acceptance or non-
payment. Such person is called a referee in case of need. It
Protest certificate. Supposedly, the protest certificate (like an is in the option of the holder to resort to the referee in case
affidavit stating the facts of the notice) is to be attached to the bill. of need or not as he may see fit.

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Referee in case of need. You can find that in Sec 131. The Example: BOE—he accepted for the honor of the drawer, A. the
drawer or indorser will indicate another person who you can go acceptor for honor would then be liable to B and all the other
after in case the instrument is dishonored by non-acceptance or parties subsequent to A.
non-payment. However, it is optional on the part of the holder if
he will go to that referee in case of need or not. Different siya Of course di gyud na apil ang person na iyang gi-acceptan for
from the payer for honor or acceptor for honor kay that person honor kay ang expectation dinha is mubayad man toh siya niya
you can resort to even without protesting the instrument. Kaning nuon.
mga acceptor or payer for honor, it requires protest man. But,
more or less, they occupy the same position that they will only To emphasize, the primary person to whom he is liable is really
become liable in case the instrument is dishonored. the holder kay ang holder man ang maningil but all the other
parties, liable sad siya for as long as they are subsequent to the
Sec. 162. Acceptance for honor; how made. - An acceptance person in whose honor he accepted the instrument.
for honor supra protest must be in writing and indicate that
it is an acceptance for honor and must be signed by the Sec. 163. When deemed to be an acceptance for honor of the
acceptor for honor. drawer. - Where an acceptance for honor does not expressly
state for whose honor it is made, it is deemed to be an
How do you make an acceptance for honor? It must be in acceptance for the honor of the drawer.
writing and indicate that it is an acceptance for honor and must
be signed by the acceptor for honor. If it is not mentioned in whose honor the instrument is
accepted, what is the presumption? It is deemed to be an
Do you have to go to the notary public in this case? The acceptance for honor of the drawer.
contemplation of the law is yes, you have to go to a notary public
and attest that you are willing to accept the instrument for the Sec. 166. Maturity of bill payable after sight; accepted for
honor of this particular person honor. - Where a bill payable after sight is accepted for
honor, its maturity is calculated from the date of the noting
Who can be a person who you can accept the instrument for for non-acceptance and not from the date of the acceptance
his or her honor? Any of the parties secondarily liable—drawer for honor.
or indorsers.
Section 166—seems to be a special provision intended only for
Can there be more than one acceptors for honor? Yes, what a bill payable after sight. Where a bill payable after sight is
is necessary is that it must have the consent of the holder. There accepted for honor, its maturity is calculated from the date of
must always be consent on the part of the holder. noting of non-acceptance and NOT on the date of the acceptance
for honor. This is because an acceptance for honor will have to
Is it required that the acceptance be for the full amount? No, happen prior to the maturity of the instrument but of course, this
it could also be partially. presupposes that this is after the instrument has been
dishonored. Unsa man imong iprotest kung wa pa na dishonor
Sec. 165. Agreement of acceptor for honor. - The acceptor ang instrument? The instrument then must be previously
for honor, by such acceptance, engages that he will, on due dishonored.
presentment, pay the bill according to the terms of his
acceptance provided it shall not have been paid by the Example: Instrument is due for payment 10 days after sight, nya
drawee and provided also that is shall have been duly it was presented for acceptance on Nov 5. The due date is
presented for payment and protested for non-payment and supposed to be on Nov 15. If the instrument was dishonored on
notice of dishonor given to him. Nov 5, you will have to protest it. It will be protested on the same
day also. If the instrument was accepted for honor on Nov 10, the
Can you go after the acceptor for honor? You can only go reckoning point for the maturity of the instrument is still Nov 5.
after him if the instrument has been duly presented for payment
to the drawee and then it was protested for non-payment by the The law deemed it that if the instrument is payable a certain
drawee. After, you have to give him a notice of dishonor. Daghan period after sight then it should be the date at the time the
kayo siyag conditions before you can go after him instrument was dishonored as the reckoning point for the
purposes of determining maturity.
The holder has to make presentment for payment of the bill on
maturity NOTWITHSTANDING PRIOR DISHONOR by non- Sec. 167. Protest of bill accepted for honor, and so forth. -
acceptance. Reason is that the drawee, after his first refusal, may Where a dishonored bill has been accepted for honor supra
have reached an understanding with the drawer for the payment protest or contains a referee in case of need, it must be
of the bill protested for non-payment before it is presented for
payment to the acceptor for honor or referee in case of need.
Steps (Pre-Pro-No): Presented for payment—Protested for non-
payment—Notice of dishonor must be given “Where a dishonored bill has been accepted for honor or
contains a referee in case of need, it must be protested for
Sec. 164. Liability of the acceptor for honor. - The acceptor non-payment before it is presented for payment to the
for honor is liable to the holder and to all parties to the bill acceptor for honor or to the referee in case of need”—this is
subsequent to the party for whose honor he has accepted just a repetition of Sec 165 (Pre-Pro-No). Ang kalahi lang jud kay
sa Sec 165, wa man gud nimention sa referee in case of need.
To whom is the acceptor for honor liable to if ever he In this case then, the referee in case of need requires protest for
accepted the instrument? He will be liable to the person non-payment before it is presented for payment to him.
subsequent to the party in whose honor he accepted the
instrument. Sec. 168. Presentment for payment to acceptor for honor,
how made. - Presentment for payment to the acceptor for
honor must be made as follows:

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(a) If it is to be presented in the place where the protest November 6, 2018
for non-payment was made, it must be presented
not later than the day following its maturity. Sec. 171. Who may make payment for honor. - Where a bill
(b) If it is to be presented in some other place than the has been protested for non-payment, any person may
place where it was protested, then it must be intervene and pay it supra protest for the honor of any
forwarded within the time specified in Section one person liable thereon or for the honor of the person for
hundred and four. whose account it was drawn.

Sec 168; How do you present for payment to an acceptor for 1. What is payment for honor? Payment made by a
honor? If it is to be presented in the place where protest for non- stranger or party to the bill after it has been dishonored
payment was made, then it must be presented not later than the and protested for nonpayment for the benefit of any
day following its maturity. If it’s in some other place, then you look party liable or for the benefit or whose account it was
at Sec 104 (by mail or otherwise given than by mail). drawn

Sec. 169. When delay in making presentment is excused. - It is also called payment supra protest because prior
The provisions of Section eighty-one apply where there is protest for non-payment is required
delay in making presentment to the acceptor for honor or
referee in case of need NOT APPLICABLE TO PN

Sec. 81. When delay in making presentment is excused. - Sec. 175. Effect on subsequent parties where bill is paid for
Delay in making presentment for payment is excused when honor. - Where a bill has been paid for honor, all parties
the delay is caused by circumstances beyond the control of subsequent to the party for whose honor it is paid are
the holder and not imputable to his default, misconduct, or discharged but the payer for honor is subrogated for, and
negligence. When the cause of delay ceases to operate, succeeds to, both the rights and duties of the holder as
presentment must be made with reasonable diligence. regards the party for whose honor he pays and all parties
liable to the latter.
Can you excuse a delay in the presentment for payment to
the acceptor for honor? Yes, the same way in Sec 81 when the 2. What is the effect if there is payment for honor? All
delay in presentment for payment (and even notice of dishonor) parties subsequent to the party for whose honor it is
is also excused. paid are discharged. The payer for honor is subrogated
to the rights of the holder as regards the person to
Sec. 170. Dishonor of bill by acceptor for honor. - When the whose honor he is paying and all parties liable to the
bill is dishonored by the acceptor for honor, it must be latter. He has the right to be reimbursed. If the payment
protested for non-payment by him. is made for the honor of all parties to the bill, then the
payer for honor may have recourse against all of them
Dishonor of bill by acceptor for honor. This happens when the for reimbursement.
bill is dishonored by the acceptor for honor. It must be “protested
for non-payment by him”. This means that you will have to In a PN, there is no such right of reimbursement if there
protest again the instrument for non-payment. is a payer for honor in a foreign promissory note

Basically, you protest the instrument for non-payment 3X na in Sec. 172. Payment for honor; how made. - The payment for
this case. First, you protest because the instrument was not honor supra protest, in order to operate as such and not as
accepted (protest for dishonor by non-acceptance or for a mere voluntary payment, must be attested by a notarial act
better security). Second, come maturity date, you present the of honor which may be appended to the protest or form an
instrument for payment, now it will be dishonored. So you protest extension to it.
the instrument for non-payment (protest for non-payment by
the drawee to hold acceptor for honor liable). Third, you go to Sec. 173. Declaration before payment for honor. - The
the acceptor for honor, di siya mubayad. Balik nasad ka’g protest notarial act of honor must be founded on a declaration made
for non-payment (protest for non-payment by the acceptor for by the payer for honor or by his agent in that behalf
honor to hold drawer and indorsers whose liabilities have not yet declaring his intention to pay the bill for honor and for
become fixed because of the acceptance for honor). whose honor he pays.

3. How is a payment for honor made?

(1) Bill has been dishonored by non-payment


(2) Bill has been protested for non-payment
(3) Payment supra protest is made by any person
(stranger or party to the instrument)
(4) Payment attested by a notarial act of honor
appended to the protest or forms an extension of it
(5) Notarial act based on the declaration made by the
payer for honor or his agent of his intention to pay
the bill for honor and for whose honor he pays
(6) Payer for honor informs within reasonable time the
party whose honor he pays that he will make
payment

If the formalities are not followed, the payment will operate


as a mere voluntary payment and the payer acquires thereby

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Negotiable Instruments Law (Atty. Amago Discussion) 32
404 (A.Y. 2018-2019)
no right to full reimbursement against the party for whose
honor he pays

4. Is that the same as acceptance for honor? No

PAYMENT FOR HONOR ACCEPTANCE FOR HONOR


Protest must be for non- Protest is either for non-
payment acceptance or for better security
Bill is overdue Bill must NOT be overdue
Consent of the holder not Consent of the holder required
required nor can the holder
refuse
Acceptor is secondarily liable Acceptor is primarily liable
Notarial act of honor necessary Notarial act not necessary (but in
sir’s discussion, he said law
contemplates that it is still
necessary)
Only be one payer for honor May be several acceptors for honor
Subrogated to the rights of the Liable to the person subsequent to
holder as regards the party the party whose honor he accepted
whose honor he pays and all the instrument
parties liable to the latter

Sec. 174. Preference of parties offering to pay for honor. -


Where two or more persons offer to pay a bill for the honor
of different parties, the person whose payment will
discharge most parties to the bill is to be given the
preference.

5. Is there a preference of parties offering to pay for


honor? The person whose payment will discharge the
most parties is given preference since only one payer
for honor is allowed

Sec. 176. Where holder refuses to receive payment supra


protest. - Where the holder of a bill refuses to receive
payment supra protest, he loses his right of recourse
against any party who would have been discharged by such
payment.

6. What will be the effect if the holder does not allow


the payer for honor to pay? In payment for honor, the
holder can refuse the payment, but if he does, he cannot
anymore recover from the parties who would have been
discharged had he accepted the payment for honor. It’s
as if you forego the right against those parties who will
be discharged by the payment for honor.

Sec. 177. Rights of payer for honor. - The payer for honor,
on paying to the holder the amount of the bill and the notarial
expenses incidental to its dishonor, is entitled to receive
both the bill itself and the protest.

7. What are the rights of the payer for honor? payer for
honor is given the right to receive both the bill and the
protest to enable him to enforce his rights against the
parties who are liable to him under Sec 175.

VANILLAELA

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