NEGOTIABLE INSTRUMENTS LAW UY | DELAPENA | YONGCO | CABAHUG,A. |CABAHUG,D.

| CANE |DUMASIS
Atty. Amago
EH 402 // SY 2016-2017

WHERE WERE WE; AUGUST 16, 2016 payable to order, it is negotiated by the indorsement of the holder and completed by
delivery.
NEGOTIATION
So it is the act which makes the party to the instrument, a holder.
There has been a debate that there is a distinction between issuance and negotiation.
Why is it important that you become a holder of a negotiable instrument? If you are a
holder of a negotiable instrument, you get to enforce the instrument for payment against
They claim that issuance of a negotiable instrument is the first time the instrument is
the person primarily liable free from the defenses of prior parties. Because if the transfer of
transferred between the maker or drawer of the instrument to the payee, while
the instrument does not constitute you as a holder, then you will be subject to the defenses
negotiation is more of transferring the negotiable instrument from one person to another
available for prior parties.
constituting that transferee as the holder of that instrument.
Negotiation can be done in 2 ways depending on the type of negotiable instrument.
But really, there is no distinction when the maker or drawer transfers the instrument to the
1. Bearer instrument = delivery
payee, after all, if the purpose of transferring such instrument is to constitute the payee as
2. Order instrument = delivery + indorsement
the holder of the instrument, then that in itself is considered negotiation. After all, what is
the purpose of the payee for receiving that instrument? To enforce the instrument against
CORRECTION:
the maker or person primarily liable and for him to be able to do that, he has to be a holder
of the instrument. Some may believe that it is not necessary because for as long as he
I promise to pay to the order of bearer one million pesos.
has title to that instrument, and need not to be holder of the instrument, he can still enforce
the instrument. That is actually true. But some authors made a distinction that if the
This should be an ORDER instrument because you would know who the bearer is. And
instrument is transferred to the payee and the purpose is just to issue the instrument,
you could also know who could make the order. I said it was a bearer instrument, that was
meaning, that is just the first instance that the instrument is transferred to the payee, they
wrong.
say that it is not negotiation. It is just a mere issuance. But I dont see any distinction after
when the payee receives the instrument under issuance process, he would still be
Payable to the order of P or bearer
considered a holder of the instrument, either a holder in due course or holder not in due
course depending on the circumstance by which he received the instrument. But that is
This is an ORDER instrument. Because if the instrument is transferred to a bearer, not
how some authors see the distinction.
necessarily P, whoever is the bearer has to indorse the instrument. It cannot be transferred
by mere delivery. After all, you would know who the bearer is. Yes, it falls along those
It would only become negotiation when the instrument is NOT directly transferred to the
when the instrument does purport to be the name of any person, but he can be
payee, when it passes through an agent or a third person BEFORE it gets transferred to
determined with reasonable certainty. That is why it is treated as an ORDER instrument so
the payee, in that case, the transfer of the instrument to the payee becomes negotiation.
it should require the indorsement of whoever is the bearer.
When directly to the payee from the maker or drawer, it is ISSUANCE. But when
transferred other than the maker or drawee, it means that the instrument has been
So if payable to order, meaning it is an ORDER INSTRUMENT then it can only be
previously negotiated to another person then such transfer to the payee is considered
negotiated by indorsement PLUS delivery. So this is the 2 forms of negotiation. Depending
NEGOTIATION. That seems to be the current state of principle at the moment that there is
whether it is a bearer or an order instrument.
a distinction between issuance and negotiation.
Sec. 31. Indorsement; how made. - The indorsement must be written on the
But for me, the effect would still be the same because what will happen to the payee? By
instrument itself or upon a paper attached thereto. The signature of the indorser,
issuing the instrument to the payee, the payee becomes the holder of the instrument
without additional words, is a sufficient indorsement.
therefore he can enforce payment on the instrument. If it is negotiation it is the same thing.
So how do we define negotiation? We have section 30 stating it.
Section 31 clarifies as to how an indorsement is made. In obligations and contract, there
are several types of delivery, there is actual and constructive delivery. For purposes of
Sec. 30. What constitutes negotiation. - An instrument is negotiated when it is
negotiation, it can only be actual or constructive. Say for example there is a negotiable
transferred from one person to another in such manner as to constitute the
instrument that the promissory note is made in favor of B instead of personally handling
transferee the holder thereof. If payable to bearer, it is negotiated by delivery; if
the instrument to B, what A did is that along with some other documents, he had the PN

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NEGOTIABLE INSTRUMENTS LAW UY | DELAPENA | YONGCO | CABAHUG,A. |CABAHUG,D. | CANE |DUMASIS
Atty. Amago
EH 402 // SY 2016-2017
delivered through a courier (not personally) to B. So in this scenario, the PN along with
other documents are deemed constructively delivered. In that case, there is already
negotiation.
The only one applicable here is execution of legal documents or tradition symbolica. Not
brevi manu nor longga manu and definitely not constitutum possesorium.
So there is not much of any issue as to how a bearer instrument can be negotiated
because it is as simple of delivering it to the supposed transferee and the purpose of
which is to constitute him as holder.
How do you make an indorsement? (Refer to Section 31)
When it says it has to be written is there a requirement that there should be words of
negotiability in order to indorse a negotiable instrument?
What has to be written is (at the very least) just the signature of the indorser. In fact, you
have section 31 last sentence stating: The signature of the indorser, without
additional words, is a sufficient indorsement. It means that words of negotiability is
NOT necessary in order to make the indorsement valid for as long as the signature is
present. That would be enough to be able to transfer the instrument. Indorsement is
already required for an order instrument.
Can you indorse a negotiable instrument partially? No.
Sec. 32. Indorsement must be of entire instrument. - The indorsement must be an
indorsement of the entire instrument. An indorsement which purports to transfer to
the indorsee a part only of the amount payable, or which purports to transfer the
instrument to two or more indorsees severally, does not operate as a negotiation of
the instrument. But where the instrument has been paid in part, it may be indorsed
as to the residue.
Illustration:
To Mr. Cabahug,
Pay to the order of Mr. Wayne Php 10,000.
Sgd: Mr. Yongco
As a rule, you CANNOT partially negotiate an instrument. It has to be for the entire
instrument. The only way that the instrument can be negotiated is to negotiate it for the
entire amount of Php 10,000.
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Q: But is there instance where this instrument can be transferred not for the entire
amount?
A: When the instrument is paid in parts. When the instrument is payable by installments
where there is particular date where the instrument is due for payment and for a particular
amount.
To Mr. Cabahug,
Pay to the order of Mr. Wayne Php 10,000, payable as follows:
P 5,000 on 31 May 2016
P 5,000 on 31 August 2016.
Sgd: Mr. Yongco
Q: Since it is already august 16,2016, how could you possibly negotiate it?
A: For the amount of P5000 only granting that the first installment has already been paid.
Only in that instance can there be partial indorsement because the rule in indorsement is
that it has to be indorsed for the whole amount. Only when there has already been a
partial payment on the instrument can you negotiate it PARTIALLY. (This is the only
instance contemplated by law where it allows partial indorsement)
Q: Does it necessarily mean that partial indorsement would only happen when the
instrument is payable on installment?
A: Yes, because that is the only instance where in you would know that the instrument has
already been partially paid. Even if there was already partial payment made by the drawee
to the holder. There is a rule that upon presentation of the instrument for payment that if
the payment is made partially, not for the full amount, then it would be considered as
DISHONORED unless it is payable on installment. If the instrument is dishonored, you
have to give notices to all the parties who are secondarily liable otherwise they would all
be discharged.
Sec. 41. Indorsement where payable to two or more persons. - Where an instrument
is payable to the order of two or more payees or indorsees who are not partners, all
must indorse unless the one indorsing has authority to indorse for the others.
Where the instrument is payable to several or two or more persons, it must be signed by
all of the payees; granting that none of them has the right to represent on another.
If one has the authority to sign for the other, then they only need the signature of such
payee in order to indorse it to another.
NEGOTIABLE INSTRUMENTS LAW UY | DELAPENA | YONGCO | CABAHUG,A. |CABAHUG,D. | CANE |DUMASIS
Atty. Amago
EH 402 // SY 2016-2017
Q: If the instrument is payable to only one payee but at the back of the instrument it
was indorsed to several payees, such as indorsed to C or B, is this allowed?
A: No, because according to Sec.32 of NIL you cannot have several indorsees. You
can have several payees but cannot have several indorsees.
Sec. 32. Indorsement must be of entire instrument. - The indorsement must be an
indorsement of the entire instrument. An indorsement which purports to transfer to
the indorsee a part only of the amount payable, or which purports to transfer the
instrument to two or more indorsees severally, does not operate as a negotiation of
the instrument. But where the instrument has been paid in part, it may be indorsed
as to the residue.
Q: If the instrument was indorsed jointly, such as indorsed to C and B, is this
allowed?
A: Yes, because the joint indorsement of an instrument is not prohibited under Sec.32. For
the instrument to be further negotiated, the two indorsees must indorse/sign the
instrument or if one of them is authorized by the other then only that person can negotiate
it without the indorsement/signature of the other.
Pay to B P5,000 to C P5,000
This is not valid. This kind of indorsement is encouraging A and B to indorse only a portion
of the instrument. It would be encouraging partial indorsement of the instrument. It is not
allowed under Sec. 32.
Even if you would say that B and C would merely indorse it to one person, what would
stop them from indorsing it to two separate persons and for only the partial amount?
To: Mr. Cabahug,
Pay to the order of A P5,000 on Aug. 16, 2016 and pay to the order of B P5,000
on Aug. 20, 2016.
This is not considered as instrument payable on installment. It would be considered as two
separate negotiable instrument. One is P5,000 for A and another P5,000 for B granting
that it is for the order of A and for the order of B.
TAKE NOTE: You cannot do this in a negotiable instrument.The best thing to do is to
issue two negotiable instruments. Even more so you cannot do this in an indorsement.
The intention of Sec. 32 is to prevent the multiplicity of suits. Wherein one instrument
would be the basis of several causes of action.
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Sec. 33. Kinds of indorsement. - An indorsement may be either special or in blank;
and it may also be either restrictive or qualified or conditional.
Blank Indorsement- by simply signing at the back of the instrument.
Special Indorsement- if you specify the indorsee or the person who will receive favor
over the instrument.
Blank indorsement cannot be qualified nor conditional since it does not specify who the
indorsee is.
Sec. 34. Special indorsement; indorsement in blank. - A special indorsement
specifies the person to whom, or to whose order, the instrument is to be payable,
and the indorsement of such indorsee is necessary to the further negotiation of the
instrument. An indorsement in blank specifies no indorsee, and an instrument so
indorsed is payable to bearer, and may be negotiated by delivery.
In order for the instrument to be negotiated, it must specify to whom or to whose order the
instrument is payable and the indorsement of such person to further negotiate it.
Pay to B
Sgd. A
Sgd. B
It is important to determine how we are going to negotiate the instrument. If it is a blank
indorsement, then you can indorse the instrument by mere delivery. If it is a special
indorsement, the indorser must first sign the instrument before delivering it to the
indorsee.
A blank indorsement is payable to bearer. Once an instrument becomes a bearer
instrument, it will always be a bearer instrument.
Sec. 35. Blank indorsement; how changed to special indorsement. - The holder may
convert a blank indorsement into a special indorsement by writing over the
signature of the indorser in blank any contract consistent with the character of the
indorsement.
NEGOTIABLE INSTRUMENTS LAW UY | DELAPENA | YONGCO | CABAHUG,A. |CABAHUG,D. | CANE |DUMASIS
Atty. Amago
EH 402 // SY 2016-2017
If you were C, the holder of the instrument, you insert the words Pay to C above the
signature of B to change a blank indorsement into a special indorsement.
C can write Pay to C and he just converted the blank indorsement of B to a special
indorsement by writing a contract consistent with the intention of the parties. You would
know that the intention of B was to have the indorsement in favor of C, afterall it was the
signature of C was found thereafter. Thats just how you convert a blank indorsement to a
special indorsement. Take note that every indorsement constitutes a contract and one of
the characteristics being featured of a negotiable instrument is the accumulation of
secondary contracts. When it says contract, it is simply indicating whoever is the indorsee.
By making this indorsement special, C in effect is making it an order instrument. The
problem is he signed it here in blank also, so the instrument is still considered bearer after
C.
In this
instrument, it can be implied that the current holder is D. If D wants, in order to make the
instrument an order instrument, he can write the indorsement of B. If you look at the back
of the instrument, the instrument remains to be an order instrument. Because now it is an
order instrument the instrument is already an order instrument. But the contemplation of
the law is that before the instrument is transferred to C, originally it just says like this:
Pay to B
Sgd. A
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Pay to C
Sgd. B
Before C accepts it, he has to inform B that I want you to write the indorsee of your
indorsement so that the instrument will already be considered an order instrument. Why
would you want it to be an order instrument? So that parties will all have their warranties in
your favor. C will just then require D to write Pay to C or he himself will write Pay to C
so that it will be consistently be an order instrument. If you look at the face of the
instrument, it is consistent and it is not actually wrong because you can trace the title of
the instrument but in that case you have to inform B and whoever may be the prior parties
because if not, it will change the character of their liability. Theres no problem actually if D
will require or at least place here pay to C so that the instrument here becomes an order
instrument.It is still the prerogative of D afterall. However, D will have to inform B and also
C, it will not change their liability afterall. D here can still trace title t up to A because there
is a series of unbroken indorsement. So the liabilities of A, B and C will still be the same
but it will be for the protection of D. Of he wants this it will be for the protection of whoever
D will transfer this instrument to. He may want to do that and it will continue to become an
order instrument if D consents to it because if D will not consent, it remains that his
indorsement is blank and then the instrument will be considered as a bearer instrument
and the prior parties has to consent to it cause it will change somehow their liability at least
to all parties thereafter.Consent is required although the law does not specify it. But that
should have been the contemplation otherwise you can never convert a blank indorsement
to a special indorsement. The real contemplation there is that before C accepts the
instrument, he will require B to change his indorsement to a special indorsement by simply
writing whatever contract is consistent. Otherwise, if there is no consent, it will change the
character of the instrument. It will change if the parties who actually had the blank
indorsement agreeing to it. They must have consented to it.
SEC 36: When indorsement restrictive. An indorsement is restrictive which either:
a.) Prohibits the further negotiation of the instrument; or
b.) Constitutes the indorsee the agent of the indorser; or
c.) Vests the title in the indorsee in trust for or to the use of some other
persons.
But the mere absence of words implying power to negotiate does not make
an indorsement restrictive.
a. Prohibits the further negotiation of the instrument; or
Pay to bearer one million pesos
Pay only to A
 NEGOTIABLE INSTRUMENTS LAW UY | DELAPENA | YONGCO | CABAHUG,A. |CABAHUG,D. | CANE |DUMASIS
Atty. Amago
EH 402 // SY 2016-2017
While originally on the face of the instrument pay to bearer one million pesos, if at the
back of the instrument it says there pay to A only that means that this instrument can
only be paid to A and because it says pay to A only. You can no longer negotiate the
instrument. It changes the instrument from negotiable to non-negotiable.In this type of
restrictive indorsement, you can no longer negotiate it. At least validly. In effect, you are
killing the negotiability of the instrument by making this type of restrictive indorsement.
b. Constitutes the indorsee the agent of the indorser; or
It only makes A an agent for collection. There is no transfer of title from the current holder
to the agent of that person.
Lets say Pfizer is the one who indorsed the instrument restrictively by constituting A as its
agent. In that case, A is only restricted to collect that amount in the instrument but then
Pfizer could still make a negotiation in the instrument. The instrument remains to be
negotiable. It is only the right of A over the instrument which is being restricted. In fact, A
can also negotiate the instrument. By negotiating the instrument, he can only transfer his
right to collect on the instrument.
The more accepted principle is that subparagraph A converts the instrument from
negotiable to non-negotiable but letters B and C do not. There is only one restrictive
indorsement which change the negotiable instrument to non-negotiable and it is letter A
because in that case you can no longer transfer the instrument to anyone else but only to
whoever person is allowed to receive payment on the instrument.
c. Vests the title in the indorsee in trust for or to the use of some other persons.
As to transferring the instrument in trust for another, they may be restrictive indorsement
but they do not convert the instrument from negotiable to non-negotiable.
Pay to A in trust for B
It contemplates that there is a legal title transferred to A however as a trustee of B.
B has the beneficial interest in the instrument. A is in effect again just a collector
In Sec 36(B), the indorsee represents the indorser, while in letter (C), the indorsee
represents the third person not the indorser because it is in trust of a third person.
It does that change the negotiable character of the instrument because whoever is the
indorsee made by the person who receives the instrument in trust of another, can again
transfer his right. Only for the purpose of collecting the instrument in trust of whoever was
specified by third person. So if it says there Pay to A of B and A decided to have this
instrument indorsed signed A, lets say Pay to C. The right of C is simply to hold the
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proceeds in trust of B. So it further negotiates the instrument just like that of an agent - he
only receives the right of whoever is the indorsee of the restrictive indorsement.
These are called restrictive but it does not change the character of the instrument from
negotiable to non-negotiable because you can still negotiate the instrument but in effect
what is only transferred is your right as restricted in a restrictive indorsement. So, when A
transfers it to C, the right of C is to hold the proceeds in trust of B so on. It will always be in
trust of B.
SEC 37. Effect of restrictive indorsement; rights of indorsee. A restrictive
indorsement confers upon the indorsee the right:
(a) To receive payment of the instrument;
(b) To bring any action thereon that the indorser could bring;
(c) To transfer his rights as such indorsee, where the form of the indorsement
authorizes him to do so.
But all subsequent indorsees acquire only the title of the first indorsee under the
restrictive indorsement.
Like C here can only receive payment of the instrument in trust of B. But Sec 37 (a), (b),
and (c) does not apply to all types of restrictive indorsement because letter C can only be
done under Sec 36(b) and (c) because under letter A, he cannot further transfer his right to
any other indorsee because it changes the character of the instrument already from
negotiable to non-negotiable. There could be no further negotiation of the instrument and
so there could be no succeeding indorsee. He has the right to receive payment on the
instrument and to bring any action thereon that the indorser could bring. But there could
be no transfer of rights to another indorsee. Afterall letter C also has a qualifying phrase
where the form of the indorsement authorizes him to do so
SEC 38. Qualified indorsement. A qualified indorsement constitutes the indorser a
mere assignor of the title to the instrument. It may be made by adding to the
indorsers signature the words without recourse or any words of similar import.
Such an indorsement does not impair the negotiable character of the instrument.
A: So, how do you make a qualified indorsement?
S: Pay to x or order (di madungog 6:25 onwards) without interest signed X.
A: without recourse..
Arfil:
Sir: bago rako ni ingon dba na qualified endorsement doesnt go with blank endorsement
Mr maylon do you have a negotiable instrument here?
Its not because there is no drawee
At the back of the endorsement you have a qualified endorsement. What is the effect if
you have a qualified endorsement.
NEGOTIABLE INSTRUMENTS LAW UY | DELAPENA | YONGCO | CABAHUG,A. |CABAHUG,D. | CANE |DUMASIS
Atty. Amago
EH 402 // SY 2016-2017
You cannot enforce liability against X. but in case of insolvency of the drawee. By writing a
qualified endorsement the endorser does not warrant the solvency of the person primarily
liable. If for any other reason other than the solvency you can still go after the endorser.
How about a conditional endorsement? How is it done? Ka looy ni Mr. Yongco cge lang
sya. Lain napud beh.
Sec 39
To Y
Pay to B upon his delivery of his car to me signed X
Sir: Does this make the instrument a non nego instrument?
Not it will because on the face on the instrument there is no condition as to the payment to
the instrument. What is merely condition is the payment to the endorsee.
Y could still pay the endorsee without fulfilling the condition. But in doing so B has the
responsibility to hold the proceed in trust of Y until the condition is fulfilled. If the condition
is not fulfilled and yet Y paid B it is a payment not in accordance with the drawer and so Y
cannot deduct the funds of the drawer.
Mr. Nazario You have a question?(the question was raised by Atty. Amagos friend which
was referring about an old topic)
We will go supposedly to that section, where the instrument is delivered back to a prior
party and I could be considered a prior party. So I can enforce payment on the instrument
after all I am entitled to it but my interest is only to the extent of my share in the
instrument.
In the amount of 1 million pesos, lets assume only me and Monteclar are the owners of
this instrument so 500 thousand. So in that case, I can enforce payment of 500 thousand.
But lets just assume I also represent Monteclar so I can get the full 1 million pesos. But
the other 500 thousand, I am holding it in trust of Monteclar. But Ian Cabahug has a cause
of action against me because I stole the instrument from him. But whether I can enforce
payment to the drawee, I can because I am entitled in the face of the instrument but more
so because this instrument is a bearer instrument and whoever is the holder of this
instrument can go to the drawee and ask payment for it.
Now you may say that I may not be a holder in due course because I stole the instrument
but in the first place, because I am a prior party, I am reverted back to my original position
in the instrument and I am payee of the instrument. So the manner by which I am able to
take hold of the instrument thereafter will not matter as I am reverted back to my original
position. In that case I am a payee who has an interest over the instrument.
Therefore, I can enforce payment on the instrument against the person primarily
liable. Its just Mr. Ian Cabahug has a cause of action against me after all I stole the
instrument. Under NIL, I can enforce payment.
Sec. 40. Indorsement of instrument payable to bearer. - Where an instrument,
payable to bearer, is indorsed specially, it may nevertheless be further negotiated
by delivery; but the person indorsing specially is liable as indorser to only such
holders as make title through his indorsement.
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No one will stop you if you would want to indorse a bearer instrument. A bearer instrument
can simply be negotiated by mere delivery. But there is an effect though if you will
negotiate an instrument even if it is a bearer instrument.
A person who negotiates a bearer instrument. Where a person can be liable to
any subsequent party who can trace title to his instrument. A bearer instrument
supposedly doesnt require any indorsement but if it is indorsed, then whoever is
the indorser is liable as an indorser after all he made an indorsement.
For bearer instrument supposedly you are only liable to the immediate transferee
because your warranty only extends to the immediate transferee but because
you are an indorser you can be liable not only to the immediate transferee but to
all subsequent parties who can trace title to your indorsement.
Q: What does that who can trace title to your indorsement mean?
A: It has to be a series of unbroken indorsements. If its unbroken, you just have to count
the parties who has made indorsement after you and if ever there is a break in such
indorsement, all parties after the break, you will not be liable to those persons any more.
Illustration: Instrument drawn by M, payable to bearer; In favor of P then that instrument
was negotiated to A who specially indorsed the instrument in favor of B who again
specially indorsed the instrument to C who indorsed it in blank in favor of D. Against whom
can D enforce the instrument?
M ---> P --->A --->B --->C ---> D ---> E
Mere Delivery
- Primarily D can enforce the instrument on M who is primarily liable. If ever M
cannot pay the instrument, then you go to parties secondarily liable.
- Take note under section 40: If you make an indorsement, whoever can trace title
to your indorsement you will be held liable to such party. In relation to C, who can
trace title from the indorsement made by C? D.
- From the indorsement of B, both C and D can trace title because B indorsed the
instrument to C, C indorsed it to D through blank indorsement.
- Who can trace title for A? B, C, and D. So A is also liable to D because he can
trace title to him. TN: series of unbroken indorsements. From A to B, special
indorsement; B to C, special indorsement; C to D, blank indorsement.
- Now if D transferred the instrument by delivery to E. Can E go after C?Not
anymore since in this case there is only a mere delivery. E cannot trace title from
the indorsement of C. This is the effect if you indorse a bearer instrument, you
can be liable as an indorser but only to those parties who can trace title through
your indorsement. Again, if there is a series of unbroken indorsements.
For as long as that particular party can trace title to the indorsement of a bearer instrument
then that party can be held liable even if it is a bearer instrument.
NEGOTIABLE INSTRUMENTS LAW UY | DELAPENA | YONGCO | CABAHUG,A. |CABAHUG,D. | CANE |DUMASIS
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EH 402 // SY 2016-2017
Illustration:M to P, P to A. under A, it was stolen by F forging the signature of A and
indorsing it to B who in turn specially indorsed it to C who then specially indorsed it to D
and blank indorsement to E. Discuss the rights of E in relation to prior parties.
M ---> P --->A --------------->B --->C ---> D ---> E
F the corporation.
DEFECT: FORGERY
DEFENSE: REAL DEFENSE
HOLDER: HOLDER IN DUE COURSE (because in the absence of any information,
presumed)
- E can go after M who is primarily liable to the instrument after all the forged
signature is not necessary to the title of E.
- E can demand from F because he committed the crime of forgery and such is
punishable under the law.
- E can go to B, C and D as indorsers because they warrant that the instrument is
genuine and all respects what it purports to be. Because you can trace title to B, C
and D, then all of them made the warranty to you as indorsers. Their warranty is
under section 65 extends to E because they are considered indorsers and E can
trace title through their indorsement. (so what you learned before will no longer
apply TN but only if there is a series of unbroken indorsements)
If C made a blank indorsement and D just delivered it to E. To whom can E go after?
- E can go to M because he is primarily liable.
- E can go after D because he warrants that the instrument it genuine and in all
respects what it purports to be.
- E cannot go after B and C because he no longer trace title through their
indorsements since there is no longer a series of unbroken indorsements. In that
case, the general rule applies: the person negotiating the delivery in a bearer
instrument will be liable is the immediate transferor because it is only him made the
warranty to the current holder. But then again, D can go after C and D because
here there is still a series of unbroken indorsements.
Requirements if the instrument is required to be payable to two or more persons, how is
the instrument supposed to be indorsed?
General rule: All of them must indorse unless one of them is authorized to represent the
other payees or other indorsees. But if the indorsees or payees are partners then either of
them may can indorse or receive payment of the instrument because they are deemed
authorized to represent each other or any of their co-payees.
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Sec. 42. Effect of instrument drawn or indorsed to a person as cashier.- Where an
instrument is drawn or indorsed to a person as"cashier" or other fiscal officer of a
bank or corporation, it is deemed prima facie to be payable to the bank or
corporation of which he is such officer, and may be negotiated by either the
indorsement of the bank or corporation or the indorsement of the officer.
So if it is made to a particular position, it is common that it is named payable to a particular
person who occupies the position. It is not actually payable to him or her personally, but to
Sec. 43. Indorsement where name is misspelled, and so forth.- Where the name of a
payee or indorsee is wrongly designated or misspelled, he may indorse the
instrument as therein described adding, if he thinks fit, his proper signature.
If it is clearly the intent of the party who drafts the instrument to give the instrument to her,
it can transfer title to her. But currently, BSP circular is very strict especially checks. If
there is mistake the bank will not accept.
Sec. 44. Indorsement in representative capacity. - Where any person is under
obligation to indorse in a representative capacity, he may indorse in such terms as
to negative personal liability.
Sec. 19. Signature by agent; authority; how shown. - The signature of any party may be
made by a duly authorized agent. No particular form of appointment is necessary
for this purpose; and the authority of the agent may be established as in other
cases of agency.
Sec. 20.Liability of person signing as agent, and so forth.- Where the instrument
contains or a person adds to his signature words indicating that he signs for or on
behalf of a principal or in a representative capacity, he is not liable on the
instrument if he was duly authorized; but the mere addition of words describing him
as an agent, or as filling a representative character, without disclosing his principal,
does not exempt him from personal liability.
Add that you are signing as an agent on behalf of the principal, plus write the name
of the principal. If you fail to state, you will be liable personally and principally
liable.
Sec. 45. Time of indorsement; presumption. - Except where an indorsement bears date
after the maturity of the instrument, every negotiation is deemed prima facie to have
been effected before the instrument was overdue.
NEGOTIABLE INSTRUMENTS LAW UY | DELAPENA | YONGCO | CABAHUG,A. |CABAHUG,D. | CANE |DUMASIS
Atty. Amago
EH 402 // SY 2016-2017

Sec. 46.Place of indorsement; presumption.- Except where the contrary appears, every
indorsement is presumed prima facie to have been made at the place where the
instrument is dated.
There is a principle that an instrument which is negotiable continues to be
negotiable until restrictively indorsed or discharged by payment or otherwise.
Sec. 47. Continuation of negotiable character. -An instrument negotiable in its origin
continues to be negotiable until it has been restrictively indorsed or discharged by
payment or otherwise.
Negotiable character ceases when restrictively indorsed, discharged by payment, o
by other means (e.g. mutilation).
You cannot strike out the indorsement of P because it is necessary to the title of E. If
striken out, the instrument is back to being order instrument which is not allowed.
Sec. 49. Transfer without indorsement; effect of. - Where the holder of an instrument
payable to his order transfers it for value without indorsing it, the transfer vests in
the transferee such title as the transferor had therein, and the transferee acquires in
addition, the right to have the indorsement of the transferor. But for the purpose of
determining whether the transferee is a holder in due course, the negotiation takes
effect as of the time when the indorsement is actually made.
It is a mere assignment, and not negotiation. You cannot have rights higher than the
transferor. You are merely stepping into the shoes of the transferor. Unlike in
negotiation that the transferee can acquire better rights than the transferor.

Sec. 48. Striking out indorsement. - The holder may at any time strike out any
indorsement which is not necessary to his title. The indorser whose indorsement is
struck out, and all indorsers subsequent to him, are thereby relieved from liability
on the instrument.

If A simply delivered the instrument to B, B will only acquire the rights of A. you can raise
defenses against B that can be raised against A.

Whose indorsement can E strike out?
A,B,C since it is a bearer instrument. It need not be indorsed. If E will strike out A,B and C,
they are relieved from liability. D will be prejudiced because ABC cannot be held liable. If D
pays E, D can only go after M.
But you can have the right to have it indorsed by the transferor. The reckoning date of
negotiation is at the date when the instrument is actually indorsed.
If it was indorsed after he acquired knowledge of any infirmity, he cannot be considered as
a holder in due course.
Sec. 50. When prior party may negotiate instrument. - Where an instrument is
negotiated back to a prior party, such party may, subject to the provisions of this
Act, reissue and further negotiable the same. But he is not entitled to enforce
payment thereof against any intervening party to whom he was personally liable.

Whose indorsement can E strike out?

ABC because they are no longer necessary to the title of E because P made a blank
indorsement in favor of A, the instrument is already considered bearer and can be further
negotiated by delivery.

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NEGOTIABLE INSTRUMENTS LAW UY | DELAPENA | YONGCO | CABAHUG,A. |CABAHUG,D. | CANE |DUMASIS
Atty. Amago
EH 402 // SY 2016-2017

Effect of indorsement to prior party: not entitled to enforce payment against

intervening party: A,B.
You are reverted to your prior position. But you are not precluded from further negotiating
the instrument if the instrument is not yet due.

If ever there will be indorsements involved, can C&D go after P&A? YES because
they are prior parties in relation to C&D.

But if P paid, can P go after A&B? No because he is reverted to his prior position. As to
subsequent parties, he could still be considered prior party. But once the instrument is paid
by the prior party who has intervening parties, he cannot go after the intervening party.