_________________________________________________________________ Liabilities of an indorser

Q: Who are considered Indorsers? A: Sec. 63. When a person deemed indorser. - A person placing his signature upon an instrument otherwise than as maker, drawer, or acceptor, is deemed to be indorser unless he clearly indicates by appropriate words his intention to be bound in some other capacity A person signing his name on the back of an instrument is, nothing else appearing, a general indorser He is chargeable only after presentment and notice of dishonor

Kinds of indorsement: 1.) special 2.) blank 3.) absolute 4.) conditional 5.) restrictive 6.) qualified 7.) joint 8.) irregular

Liability of agent bank for collection A collecting bank does not indorse the check as a general indorser but merely as an agent bank, guaranteeing only prior indorsemnet, not the genuineness of the check itself, so that it is not liable to the drawee bank which paid the check in case the signature of the draw er was forged. EXCEPTION TO THIS ARTICLE: Section 69 (if he indicates that he is bound in any other capacity such as if he is signing as an agent) Liabilities of a Regular Indorser Sec. 66. Liability of general indorser. - Every indorser who indorses without qualification, warrants to all subsequent holders in due c ourse: (a) The matters and things mentioned in subdivisions (a), (b), and (c) of the next preceding section; and (b) That the instrument is, at the time of his indorsement, valid and subsisting; And, in addition, he engages that, on due presentment, it shall be accepted or paid, or both, as the case may be, according to its teno r, and that if it be dishonored and the necessary proceedings on dishonor be duly taken, he will pay the amount thereof to the holder , or to any subsequent indorser who may be compelled to pay it. Warranties of negotiators by delivery and qualified indorsers are the same. The difference is that warranties of negotiators by delivery only extend to their immediate transferee while that of qualified indorsers, extend to all subsequent holders who make title thr ough his indorsement. Reason for the difference is that in a bearer instrument, there are no signatures thus you cannot trace the negotiators. As a ho lder, you only know the person who delivered such instrument to you and you dont know to whom such instrument has already passed on to. While in qualified indorsement of an order instrument, there are signatures through which you can trace the indorsements. Who are irregular indorsers? Sec. 64. Liability of irregular indorser. - Where a person, not otherwise a party to an instrument, places thereon his signature in blank be fore delivery, he is liable as indorser, in accordance with the following rules:chanroblesvirtuallawlibrary (a) If the instrument is payable to the order of a third person, he is liable to the payee and to all subsequent parties. (b) If the instrument is payable to the order of the maker or drawer, or is payable to bearer, he is liable to all parties subsequent to the maker or drawer. (c) If he signs for the accommodation of the payee, he is liable to all parties subsequent to the payee. Also known as Anomalous indorsemtn The term usually denotes an indorsement for some purpose other than to transfer the instrument

Liabilities of an irregular indorser: example If the instrument is payable to the order of a third person, he is liable to the payee and to all subsequent parties If the instrument is payable to the order of the maker or drawer, or is payable to bearer, he is liable to all parties subsequent to the maker or drawer. If he signs for the accommodation of the payee, he is liable to all parties subsequent to the payee. Sec. 65. Warranty where negotiation by delivery and so forth. Every person negotiating an instrument by delivery or by a qualified indorsement warrants: (a) That the instrument is genuine and in all respects what it purports to be; (b) That he has a good title to it; (c) That all prior parties had capacity to contract; (d) That he has no knowledge of any fact which would impair the validity of the instrument or render it valueless. But when the negotiation is by delivery only, the warranty extends in favor of no holder other than the immediate transferee. The provisions of subdivision (c) of this section do not apply to a person negotiating public or corporation securities other than bills a nd notes. Both type of indorsers do not assume to pay the instrument in the event of its dishonor UNLESS the dishonor is based on

any of the four implied warranties enumerated They are in fact, merely assigning a credit (Liabilities of Qualified and Unqualified Indorsers)

Liability of a person who Indroses a Bearer Instrument Sec. 67. Liability of indorser where paper negotiable by delivery. Where a person places his indorsement on an instrument negotiable by delivery, he incurs all the liability of an indorser. - When it is a bearer instrument, which is negotiable by mere delivery, negotiators instead of negotiating it by mere delivery, indorses it, then they shall be liable as regular indorsers. Order of Liability of Indorsers Sec. 68. Order in which indorsers are liable. - As respect one another, indorsers are liable prima facie in the order in which they indor se; but evidence is admissible to show that, as between or among themselves, they have agreed otherwise. Joint payees or joint indo rsees who indorse are deemed to indorse jointly and severally. As among themselves, every indorser is liable to all indorsers subsequent to him As to the holder of an instrument which has been dishonored, he is not bound by the above section. As to him, indorsers are liable in any order and none of them can interpose as a defense against him an agreement among themselves that they are not liable in the order of their indorsement Note: Under section 68, joint payees or joint indorsees who indorse are deemed to indorse jointly and severally. Their liability, therefo re, is solidary so that none of them can escape liability just because proper notice of dishonor was not given to the other The last sentence of Section 68 does NOT apply to an instrument containing the words we promise to pay and made payable to the or der of the maker themselves because ins such a case their liability is joint and not solidary.