NEGOTIABLE INSTRUMENTS LAW

BAR QUESTION COMPILATIONS

1. X issued an order promissory note payable to Y for P1,000,000.00 due on
August 31, 2013. The following are the order of special endorsements: Y to Z; Z
to A; A to B and B to C. D the authorized agent of C, presented the note for
payment on the maturity date but X refused to pay. If D notifies C but he failed to
notify B within 24 hours, can C after receipt of the notice of dishonor, be allowed
to notify B within 24 hours verbally or in writing without his signature? Explain
your answer with legal basis.
2. V also known as MR. BIGOTE to the public issued a bearer promissory note
in favor of Z for P1,000,000.00 due on February 14, 2014. He signed the note as
Mr. Bigote. The following are the order of special indorsement Z to A, then A to B
then B to C who in turn indorsed the note back to Mr. Bigote before the maturity
date. Mr. Bigote renegotiated by special indorsement the note to D, then D to E,
E to F, then F to G. If the signature of E was forged, who are liable to G? Explain
your answer with legal basis.
3. P, through sweet talk, convinced M to execute a mortgage over his parcel of
land in his favor. Instead of a real estate mortgage, P prepared a promissory note
in his favor payable to order for P1,000,000.00 due on April 30, 2013. Before its
maturity date, P indorsed the note A, then A to B and B to C, holder in due
course. C presented the note for payment to M but he refused to pay. If C failed
to give notice B, A and P, who will be liable to C? Explain your answer with legal
basis.
4. X has a checking account from PNB. He issued and delivered the check to M
for P1,000,000.00 dated May 30, 2013. M presented the check for acceptance
which PNB did, and later on paid M. If the signature of X was forged by Z, to
whom can PNB recover, if it can? Explain your answer with legal basis.
5. Supposing in problem no. 4, instead of presenting the check for acceptance
and payment to PNB, M deposited the same to his account at Metrobank which
guaranteed all indorsements, if the signature of X was forged, who between the
acceptor (PNB) and indorser (Metrobank) will suffer the loss.
6. The bill of exchange is addressed to X ordering the latter to pay to the order of
Y for P1,000,000.00 and signed by Z on May 30, 2013. The order of special
indorsements are as follows: Y to A, A to B, B to C and then C to D, holder in due
course. When D presented the bill for acceptance, X refused to accept but upon
call of Z, X later accepted the bill. When D presented the bill for payment, X
dishonored it, prompting Z to call back X who was firm on his stand not to pay.
Upon learning of the dishonor, B although not notified by D, he pleaded to D to
strike his indorsement which D did. In this case, who will be liable to D. Explain
your answer with legal basis.
7. In an effort to get more money on an order promissory note issued by M, P, the
payee-holder, altered the amount from P100,000.00 to P1,000,000.00. P
indorsed the note to A, then A to B and B to C. if C is not a holder in due course,
how much can C recover and from whom he can recover. Explain your answer
with legal basis.
8. P induced M to issue an order promissory note in his favor. P indorsed the
note to A, then A to B, then B to C and C to D. At the time of the inducement, C
was present but was not a party to the inducement. If D knows of the fact of the
inducement made by P to M, to whom can D recover. Explain your answer with
legal basis.

9. M issued an order negotiable promissory note to P. In the promissory note, M

indicated that Notice of Dishonor is waived. The following are the order of special
indorsements: P to A, then A to B, B to C and C to D. When B made his
indorsement, he indicated that he waived notice of dishonor. Because D was able
to read Bs waiver, he did not notify C. Who are liable to D, if M made a partial
payment to the holder over the objection of the indorsers who were not notified?
Explain your answer with legal basis.
10. M left an unsigned promissory note payable to the order of P with the amount
left in blank. M and P had a transaction involving the sale of Ps lot with the
consideration of P100,000.00. Although, the unsigned promissory note did not
indicate on their sale transaction, P forged the signature of M and filled up the
amount of P1,000,000.00. The order of special indorsement are as follows: P to
A, then A to B, B to C and C to D, holder in due course. To whom can D recover?
Explain your answer with legal basis.
11. M made a promissory note payable to bearer for P1,000,000.00. He issued
this note to N who negotiated the note to O by mere delivery. O on the hand,
made a special indorsement to P. Q who took the note without the knowledge of
O, forged the signature of P, and indorse the note to R. The latter indorsed the
note to S, by special indorsement who is a holder in due course. In case S strikes
the indorsement of P, will M be liable to S? Explain your answer with legal basis.
Will answer be the same if the promissory note is an order instrument, and all
indorsements are by special indorsement with the signature of P being forged by
Q, who will be liable to S? Explain your answer with legal basis.
12. Without a date and place of issue, X issued an order negotiable promissory
note to Y and authorized the latter to fill up the amount in blank with his loan
amount in the sum of P10,000,000 with interest at 1.5% per month . However,
Y filled it up for P100,000,000 in violation of the instruction and placed an
issue date antedating it for six months from actual date of issue and delivery.
Question:
a)When the due date arrives, and Y present the promissory note for
payment, can he recover from X? Explain your answer with legal basis.
b) Supposing Y indorses the note to A for value but who has no knowledge
of the acts made by Y, how much can A recover from X, if he can? Explain
your answer with legal basis
13. Y, the drawee of a bill of exchange payable to order on May 31, 2008 drawn
by X, in the amount of P100,000 in favor of Z, dishonored the bill. Before the
dishonor, the bill was indorsed by Z to A, a minor, who in turn indorsed it to B,
then B to C who knows of the minority of A, and then he indorsed the bill to D,
the present holder. If notice of dishonor was timely and properly given, who
are liable to D? Explain your answer with legal basis.
14. On December 5, 2013, A induces B by fraud to make a promissory note
payable on February 5, 2014 to the order of A in the sum of P5,000,000. A
indorses the note to C who did not know of the inducement by B. Since C
needed money, he indorses it to D who knew of the inducement of A.
Question:
a) Who is liable to D? Explain your answer with legal basis.
b) If the inducement by B was that a deed of sale for his car was to be
signed by A, and instead the promissory note above was signed by A,
who are liable to D? Explain your answer with legal basis.
15. M issued a promissory note payable to the order of P for P100,000
due on May 31, 2014. P indorses the note to A but As signature
was forged by B who thereafter indorses the note to C, a holder in
due course. Who is liable to C? Explain your answer with legal
basis.

16. A made a promissory note payable to bearer for P1,000,000.00. He issued

this note to B who negotiated the note to C by mere delivery. C, on the other
hand, made a special indorsement to D. X who took the note without the
knowledge of D, forged the signature of D, and indorsed the note to Y. The latter
indorsed the note to Z, by special indorsement who is a holder in due course.
Question:
a) Who are liable to Z? Answer with legal basis.
b) Supposing the note is an order instrument, and B and all subsequent
indorsements are made through special indorsements, who are liable
to Z? Explain your answer with legal basis.
17. August 31, 2014 is the maturity date of an order promissory note payable to
Y for P1,000,000.00 issued by X. The following are the order of special
endorsements: Y to Z; Z to A; A to B and B to C. If C did not make a presentment
for payment to x on the maturity date, who will be liable to him? Explain your
answer with legal basis. Follow up question, supposing C makes presentment for
payment on the due date to X but failed to notify B on the fact of dishonor,
however, he was able to notify A, who are liable to C? Explain your answer with
legal basis.
18. On March 1, 2014, Industech General Services Inc. issued a
crossed check in the amount of P300,000 postdated March 31, 2014 in
favor of A Company. Upon receipt of the check the latter have it
discounted with B Company. To whom can B Company recover on the
check, if it can? Explain your answer with legal basis
19. Z presented a forged check for P1,000,000 to PBB from the checking
account of X payable to M. He issued and delivered the check to M dated May
30, 2013. PBB paid M but later on discovered that the signature of X was forged
by Z. To whom can PBB recover, if it can? Follow up question, if the check before
the payment by PBB, was indorsed by PNB as collecting bank, who between
PBB and PNB will shoulder the loss? Explain your answer with legal basis.
20. X draws a bill for P1,000,000, addressed to W, payable to order in favor of Y
due on December 31, 2013. When presented for acceptance, W dishonored the
same, and so Y, protested the bill. B, a stranger, offered to accept for the honor of
X but her acceptance was refused by Y. Question:
a) If B insists, and goes to court to compel Y to accept, how would you
decide the case, if you are the judge? Explain your answer with legal
basis.
b) Supposing, while the case was still pending, Y accepted the payment of A,
is the bill discharged? Explain your answer with legal basis.