DIMPLE JANE B.

CARBONELL April 7, 2021

Negotiable Instruments Law

1. A promissory note states as follows: "I, Cecilia W. Donohue after date August 10, 2002
promises to pay to the order of Richard Donohue thirteen thousand and sevens pesos for
value received with interest at 6% per annum." The note was on a printed form, and the
words underscored above were in the handwriting of Mrs. Donohue. No signature appears at
any other place on the note. Is the note signed by the maker?
Answer:
Yes, the note was signed by the maker.
Section 1(a) of the Negotiable Instruments Law only states that a negotiable instrument must be
in writing and signed by the maker or the drawer. It does not require any specific form or type
of signature and even a specific place on the instrument where the signature must be placed.
Therefore, it is not necessary that a signature of the maker or the drawer must be placed at the
end of the instrument. So long as the maker or the drawer obligates herself for its payment and
intends to authenticate the instrument by affixing his/her signature or writing his/her name in
any part thereof is sufficient to bind the maker or drawer of the instrument.
In the present case, although no signature appears at any other place on the note, the fact that
Mrs. Donohue obligates herself to pay the said amount and intends to authenticate it by writing
her name on the face of the note is sufficient enough to say that she signed the note and is
therefore binding her for the fulfillment of the said obligation.

2. A bookstore received five postal money orders totalling P1,000.00 as part of sales receipts,
and deposited the same with a bank. A day after, the bank tried to clear them with the
Bureau of Posts. It turned out, however, that the postal money orders were irregularly issued
thereby prompting the Bureau of posts to serve notice upon all banks not to pay orders if
presented for payment. The Bureau of Posts further informed the bank that the amount of
P1,000.00 had been deducted from the bank's clearing account for the same amount. A
complaint was filed by the bookstore against the Bureau of Posts and the bank for the
recovery of the sum of P1,000.00 which however, was dismissed by the trial court. The
bookstore appealed contending that postal money orders are negotiable instruments and that

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 their nature could not have been affected by the notice sent by the Bureau of Posts to the
banks. How would you resolve the controversy?

Answer:
The contention of the bank is bereft of merit.
Section 1b of Act 2031 provides that an instrument to be negotiable must contain an
unconditional promise or order to pay a sum certain in money. A postal money order does not
contain an unconditional promise or order to pay. Therefore, a postal money order is not a
negotiable instrument.

3. Po Press issued in favor of Jose a postdated crossed check, in payment of newsprint which
Jose promised to deliver. Jose sold and negotiated the check to Excel, Inc. at a discount. Excel
did not ask Jose the purpose of crossing the check. Since Jose failed to deliver the newsprint,
Po ordered the drawee bank to stop payment on the check. Efforts of Excel to collect from Po
failed. Excel wants to know from you as counsel:
1) Is Excel a holder in due course?
Answer:
Excel is not a holder in due course.
Under section 52 of Act 2031 or the Negotiable Instruments Law, a holder in due course must
have taken the instrument in good faith and for value. Here, the instrument is a crossed check
and as a payee or a person receiving a crossed check, he has an obligation to inquire on the
circumstances involving the issuance of the check. The failure of Excel to inquire constituted him
becoming in good faith and will prevent him from being a holder in due course.
2) Can Po Press raise absence or failure of consideration as a defense?
Answer:
Yes, Po Press may raise absence or failure of consideration as a defense.
In this case, there was failure of consideration because Jose failed to deliver the news print to
Po Press. This may be set up as a personal defense. Since Excel is not a holder in due course due
to his failure to inquire on the circumstances involving the issuance of the crossed check, Excel
is subject to the personal defense which Po Press can set up against Jose. There was failure of
consideration in the problem because Jose failed to deliver the news print to P Press.

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 4. Larry issued negotiable promissory note to Evelyn and authorized the latter to fill up the
amount in blank with his loan account in the sum of P1000.00 However, Evelyn inserted
P5000.00 in violation of the instruction. She negotiated the note to Julie who had knowledge
of the infirmity. Julie in turn negotiated said note to Devi for value and who had no
knowledge of the infirmity. Supposing Devi endorses the note to Baby for value but who has
knowledge of the infirmity, can the latter enforce the note against Larry?
Answer:
Yes, Baby may enforce the note against Larry.
Under Sec. 58 of the NIL, a holder who derives his title through a holder in due course, and who
is not himself a party to any fraud or illegality affecting the instrument, has all the rights of such
former holder in respect of all parties prior to the latter. Here, although Baby is a holder in due
course, she is not a party to any fraud or illegality which affects the instrument. Hence, Larry
cannot set up a breach of trust against Baby since said defense is a personal one.

5. X draws a check payable against his current account with the Ortigas Branch of Bonifacio
Bank in favor of B. Although X does not have sufficient funds, the bank honors the check
when it is presented for payment. Apparently, X has conspired with the bank's bookkeeper so
that his ledger card would show that he still has sufficient funds. The bank files an action for
recovery of the amount paid to B because the check presented has no sufficient funds. Decide
the case.
Answer:
The bank cannot recover the amount paid to B.
Section 62 of the Negotiable Instrument Law states that the acceptor, by accepting the
instrument, engages that he will pay it according to the tenor of his acceptance and admits: (a)
the existence of the drawer, the genuineness of his signature, and his capacity and authority to
draw the instrument; and (b) the existence of the payee and his then capacity to indorse.
Although payment of check is not equivalent to acceptance, the drawee who pays the check is
liable as an acceptor. Here, the drawee bank pays the check. Such act cased the bank to be
liable to B as an acceptor. As an acceptor, he engages that he will pay it according to the tenor
of his acceptance. Therefore, the drawee bank has no cause of action against B. The cause of
action of the drawee bank is against X and the bookkeeper.

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