GENERAL PRINCIPLES

Explain [1946, Bar Examinations].

A. THEORY
01. What are the requisites of a
negotiable instruments? [1953, 1954,
1964, 1968, 1989, 1991, 1996, Bar
Examinations].
02. What constitutes a holder in due
course? [1996, Bar Examinations].
03. Can a bill of exchange or a
promissory note qualify as a
negotiable instrument if a.It is not dated; or
b.The date and the month, but not the
year of its maturity is given; or
c.It is payable to cash; or
d.It names two alternative drawees
[1997, Bar Examinations].
04. A promissory note reads as
follows: I promise to pay Gabriela
Silangan P1,000.00 three years after
the unconditional withdrawal of the
U.S. of its military bases in the
Philippines. Discuss the negotiability
or non-negotiability of the note above
[1966 Bar Examinations].
05. Can the payee in a promissory
note be a holder in due course within
the meaning of the Negotiable
Instruments Law? [2000 Bar
Examinations].
06. How do you treat a negotiable
instrument that is so ambiguous that
there is a doubt whether it is a bill or a
note? [1999, Bar Examinations].
07. When a signature is so placed
upon a negotiable instrument that it is
not clear in what capacity the person
making the same intended to sign,
what is his liability? [1946, Bar
Examinations].
08. When a negotiable instrument
contains the words I promise to pay
and is signed by two or more persons,
what is their liability, joint or solidary?

B. TESTS OF NEGOTIABILITY
09. MP bought a used cellphone from
JR. JR preferred cash but MP is a friend
so JR accepted MPs promissory note
for P10,000.00. JR though of
converting the note into cash by
indorsing it to his brother KR. The
promissory note is a piece of paper
with the following hand-printed
notation: MP WILL PAY JR P10,000.00
IN PAYMENT FOR HIS CELLPHONE ONE
WEEK FROM TODAY. Below this
notation is MPs signature with 8/1/00
next to it, indicating the date of the
promissory note. When JR presented
MPs note to KR, the latter said it was
not a negotiable instrument under the
law and so could not be a valid cash
substitute. JR took the opposite view,
insisting on the notes negotiability.
You are asked to referee . Which of the
opposing views is correct? Explain
[2000 Bar Examinations].
10. Perla bought a motor car payable
in installments from Automotic
Company for P250,000.00 with a
P50,000.00 downpayment. She
executed a promissory note for the
balance which reads:
For value received, I promise to pay
Automotive Company or order at its
office in Legaspi City, the sum of
P200,000.00 with interest at 12% per
annum, payable in equal installments
of P20,000.00 for ten (10) months
starting 21 October 2002.
SGD Perla
Manila, 21 September 2002

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Automotive Company subsequently

indorsed the note to Reliable Finance
Corporation which financed the
purchase. Perla defaulted in the
payment of her installments. Is the
above promissory note a negotiable
instrument? Explain [1992 Bar
Examinations].

11. Romeo had P100,000.00 in his

current account at Matatag Banking
Corporation. Romeo learned that his
enemy had hired a contract killer to
liquidate him. Fearful of his life, he
mailed to his fiance, Juliet, a check for
his P100,000.00 in the bank. The
check was payable to Juliet or order
and was accompanied by a letter
stating that he was giving her his
money out of his great love for her
and because something would happen
to him anytime now. Juliet presented
the check for payment but the bank
refused to honor it. Does Juliet have
any right of action against the bank?
Because of the humiliation she
suffered from the bank, Juliet broke off
her engagement with Romeo. Does
Romeo have a right of action against
the bank? Explain [1986 Bar
Examination].
12. Explain whether or not the
following instrument is negotiable.
P1,000.00 Manila, October 5, 1970
I acknowledge to have received from
Jose Cruz one thousand pesos
(P1,000.00) which I promise to pay on
demand or in five months from date
with one percent interest per month
payable within the first five days of
every month. If the interest is not paid
when due, then both principal and
interest shall become due at the

option of the holder.

SGD: Pedro Garcia
[1970 Bar Examination].
13. For value received, X executed a
promissory note in favor of Y for
P10,000.00 agreeing to pay interest
thereon but without specifying the rate
thereof. Can Y collect interest on the
note? Why? Explain [1964 Bar
Examination].

DEFENSES
C. FAILURE/ABSENCE OF
CONSIDERATION
14. In payment of canned goods he
had purchased, Pedro Flores of
Cabanatuan drew a check upon PNB
for P1,000.00 payable to the order of
Veraz and Co., the seller in Manila. He
sent the check without recourse to
Juan Santos. The latter indorsed it in
blank, for consideration, to Pablo
Reyes, who, in turn, sold it for
P800.00, by delivery to Antonio
Gomez. The canned goods were never
forwarded to Flores. Gomez presented
the check to the bank, but payment
was refused because Reyes had not
put his name on it. Is the bank right in
so refusing? Why? If Gomez gave due
notice to Veraz and Co., may he
recover from the latter? May Gomez
recover from Santos? Why? May he
recover from Reyes? Why? [1968 Bar
Examination].
15. Eva issued to Imelda a check in
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the amount of P50,000.00 post-dated

September 19, as security for a
diamond ring to be sold on
commission. On September 15, Imelda
negotiated the check to MT
Investment which paid the amount of
P40,000.00 to her. Eva failed to sell
the ring, so she returned it to Imelda
on September 19. Unable to retrieve
her check, Eva withdrew her funds
from the drawee bank. Thus, when MT
Investment presented the check for
payment, the drawee bank dishonored
it. Later on, when MT Investment sued
her, Eva raised the defense of absence
of consideration, the check having
been issued merely as security for the
ring that she could not sell. Does Eva
have a valid defense? Explain [1996,
Bar Examination].

16. A and B executed and delivered to

C a promissory note which reads: I
promise to pay C or bearer the sum of
P2,000.00 with interest at 12% per
annum on or before June 30, 1960.
Manila, February 1, 1969. SGD A and
B. Two months later, for value
received, C delivered to D the
aforesaid note with the indorsement:
Pay to D; and on April 15, 1969, the
said note was indorsed in blank by D
and delivered to X, without
consideration. Upon As refusal to pay
despite demand, X filed an action to
collect from A the total amount of the
promissory note, with 12% interest per
annum from February 1, 1969, and the
costs. As defenses are that the note is
null and void because the same was
issued to pay a gambling debt and
that in any event, his liability cannot
exceed more than one-half of the
amount due. Are As defenses valid? Is
X entitled to the whole amount of the

note? Explain. [1969 Bar Examination].

17. For the purpose of lending his
name without receiving value therefor,
Pedro makes a note for P20,000.00
payable to the order of X who in turn
negotiates it to Y, the latter knowing
that Pedro is not a party for value. May
Y recover from Pedro if the latter
imterposes absence of consideration?
Supposing under the same facts,
Pedro pays the said P20,000.00, may
he recover the same amount from X?
Explain [1998 Bar Examination].
18. Nora applied for a loan of
P100,000.00 with BUR Bank. By way of
accommodation, Noras sister, Vilma,
executed a promissory note in favor of
BUR Bank. When Nora defaulted, BUR
Bank sued Vilma, despite its
knowledge that Vilma received no part
of the loan. May Vilma be held liable?
Explain [1996 Bar Examination].
19. Santos purchased Veras car for
P50,000.00. Not having enough cash
on hand, Santos offered to pay in
check. Vera refused to accept the
check unless it is indorsed by Reyes,
their mutual friend. Reyes indorsed
Santos check and Vera, knowing that
Reyes had not received any value for
indorsing the check, accepted it. The
next day, Vera presented the check to
the drawee bank for payment.
Payment was refused for lack of funds.
Vera gave notice of dishonor to Reyes,
but Reyes refused to pay, saying that
he indorsed merely as a friend. Is
Reyes liable to Vera? In the event
Reyes voluntarily pays Vera, does
Reyes have the right to recover from
Santos? Explain [1985 Bar
Examination].

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D. INCOMPLETE DELIVERED
INSTRUMENT
20. Larry issued a negotiable
promissory note to Evelyn and
authorized the latter to fill up the
amount in blank with his loan account
in the sum of P1,000.00. However,
Evelyn inserted P5,000.00 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. Can Devi
enforce the note against Larry, and if
she can, for how much? Supposing
Devi indorses the note to Baby for
value but who has knowledge of the
infirmity, can the latter enforce the
note against Larry? Explain [1993 Bar
Examination].
21. Maria issued a negotiable
promissory note and authorized Pilar
to fill-up the amount in blank up to
P2,000.00. However, Pilar filled it up to
P4,000.00 and negotiated the note to
Pepe. For what amounts are Maria and
Pilar liable to Pepe? Explain [1972 Bar
Examinations].

E. INCOMPLETE UNDELIVERED
INSTRUMENT
22. PN makes a promissory note for
P5,000.00, but leaves the name of the
payee in blank because he wanted to
verify its correct spelling first. He
mindlessly left the note on top of his
desk at the end of the workday. When
he returned the following morning, the
note was missing. It turned up later

when X presented it to PN for

payment. Before X, T, who turned out
to have filched the note from PNs
office, had endorsed the note after
inserting his own name in the blank
space as the payee. PN dishonored the
note, contending that he did not
authorize its completion and delivery.
But X said he had no participation in,
or knowledge about, the pilferage and
alteration of the note and therefore he
enjoys the rights of a holder in due
course under the Negotiable
Instruments Law. Who is correct and
why? [2000 Bar Examination].
23. Jose makes a negotiable note
payable to bearer with the amount in
blank and delivers it to Karen for
safekeeping. Marina fills up the note
for P20,000.00 and negotiates it to
Adriano, a holder in due course. If you
were Jose and Adriano presented to
you the note for payment, what
defense or defenses are you going to
interpose to negate liability on the
instrument? Explain [1981 Bar
Examinations].
24. A entrusted to B, his secretary, a
blank check drawn on X bank, signed
by him, with instructions to fill up the
check in favor of D for the amount of
P1,000.00 and to thereafter deliver the
said check to D. In breach of trust, B
filled up the check by writing the name
of E, and the amount of P2,000.00 on
the check and delivered the same to E,
who accepted it in payment of certain
goods sold by E to B. Before E could
encash the check, A learned of the
misdeed of B and issued a stoppayment order to X bank as a result of
which X bank refused to honor the
check presented to it by E. Can E now
hold X bank and A liable? Reason
[1971 Bar Examinations].
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25. Jose Reyes signed a blank check,

and in his hasted to attend a party, left
the check on top of his executive desk
in his office. Later, Nazareno forced
the door to Reyes office and stole the
blank check. Nazareno immediately
filled in the amount of P50,000.00 and
a fictitious name as payee on the said
check. Nazareno then endorsed the
check in the payees name and passed
it to Roldan. Thereafter, Roldan
endorsed the check to Dantes. Can
Dantes enforce the check against Jose
Reyes? If Dantes is a holder in due
course, will your answer be the same?
[1985 Bar Examinations].
26. A signed a blank check which he
inadvertently left at his desk at his
Escolta Office. The same was later
stolen by B, who filled in the amount
of P22,300.00 and a fictitious name as
payee. B then endorsed the check in
the payees name and passed the
check to C; thereafter C passed it to D;
then D to E; and E to F. Can F enforce
the instrument against A? Suppose
that F is a holder in due course, what
will be your answer? Can F enforce the
instrument against B? Against C. Give
reasons [1978 Bar Examinations].

F. FORGERY
27. A delivers a bearer instrument to
B. B then specially indorses it to C,
and C later indorses it in blank to D. E
steals the instrument from D and,
forging the signature of D, succeeds in
negotiating it to F who acquires the
instrument in good faith and for value.
If, for any reason, the drawee bank
refuses to honor the check, can F
enforce the instrument against the
drawer? In case of the dishonor of the
check by both the drawee and the

drawer, can F hold any of B, C and D

liable secondarily on the instrument?
[1997 Bar Examinations].
28. Juan makes a promissory note
payable to his order, signing Pedros
name thereon as maker without
Pedros knowledge and consent. Juan
then indorses the note to Jose, who, in
turn, indorses it to Carlos under
circumstances which make Carlos a
holder in due course. May Carlos
enforce the note against Pedro? And if
the note is dishonored by Pedro, may
Carlos hold Juan and Jose liable on
their respective indorsements? Reason
out your answers [1989 Bar
Examinations].
29. Juan makes a promissory note
payable to the order of Pedro, who
indorses it to Jose. Somehow, Roberto
obtains possession of the note and,
forging the signature of Jose, indorses
it to Amado. Amado then indorses the
note to Nilo, the holder. State the
rights and liabilities of the parties
[1984 Bar Examinations].
30. A makes a negotiable promissory
note payable to B or bearer. A delivers
the note to B. B indorses the note to C.
C places the note in his wallet, which
was stolen by X, who, finding the note,
indorses it to D by forcing Cs
signature. D indorses the note to E,
who in turn, delivers the note to F, a
holder in due course, without
indorsement. What are the liabilities of
A, B and C to F. Explain briefly [1981
Bar Examinations].
31. Juan de la Cruz signs a promissory
note payable to Pedro Lim or bearer,
and delivers it personally to Pedro Lim.
The latter somehow misplaces the said
note and Carlos Ros finds the note
lying around the corridor of the
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building. Carlos Ros endorses the

promissory note to Juana Bond, for
value, by forging the signature of
Pedro Lim. May Juana Bond hold Juan
de la Cruz liable on the note? Explain
[1980 Bar Examinations].

successfully against B, the maker of

the note, for the amount of the note?
What defense/defenses can B
interpose? Explain [1978 Bar
Examinations].

32. Fernando forged the name of

Daniel, manager of a Trading
Company, as the drawer of a check.
The Bank of Philippine Islands, the
drawee bank, did not detect the
forgery and paid the amount. May the
bank charge the amount paid against
the account of the alleged drawer?
Explain [1977 Bar Examinations].

H. MATERIAL ALTERATION

G. FRAUD
33. A succeeded in making B affix his
signature on a check without Bs
knowing that it was a check. At the
time of signing, the check was
complete in all respects. A intended to
cash the check the following morning,
but that night, it was stolen by C who
succeeded in negotiating the same to
D, a holder in due course. D cashed
the check the following morning. B
refused to have the amount of the
check deducted from his bank deposit.
Who may properly be charged with the
amount of the check? Explain your
answer [1961 Bar Examinations].
34. A induces B by fraud to make a
promissory note payable on demand
to the order of A in the sum of
P5,000.00. Can A file an action
successfully against the maker B for
the amount of the note? Reasons.
Going further, A transfers the note to
C who pays P5,000.00 therefor and
acquires the note under circumstances
that make him (C) as holder in due
course. Can C file an action

35. A check for P50,000.00 was drawn

against drawee bank and made
payable to XYZ Marketing or order. The
check was deposited with payees
account at ABC Bank which then sent
the check for clearing to drawee bank.
Drawee bank refused to honor the
check on the ground that the serial
number thereof had been altered. XYZ
Marketing sued drawee bank. Is it
proper for the drawee bank to
dishonor the check for the reason that
it had been altered? In instant suit,
drawee bank contended that XYZ
Marketing as payee could not sue the
drawee bank as there was no privity
between them. Drawee theorized that
there was no basis to make it liable for
the check. Is this contention correct?
Explain [1999 Bar Examinations].
36. William issued to Albert a check for
P10,000.00 drawn on XM Bank. Albert
altered the amount of the check to
P210,000.00 and deposited the check
to his account with ND Bank. When ND
Bank presented the check for payment
through the Clearing House, XM Bank
honored it. Thereafter, Albert withdrew
the amount of P210,000.00 and closed
his account. When the check was
returned to him after a month, William
discovered the alteration. XM Bank
recredited P210,000.00 to Williams
current account and sought
reimbursement from ND Bank. ND
Bank refused, claiming that XM Bank
failed to return the altered check
Page 6 of 9

within the 24 hour clearing period.

Who, as between XM Bank and ND
Bank, should bear the loss? Explain
[1996 Bar Examinations].

refuses on the ground that it only

acted as an agent for collection. Who
bears the loss? Why? [1977 Bar
Examinations].

37. In consideration of some goods he

bought, A issued to B a personal check
in the amount of P280.00 which B
altered to P2,800.00 without the
knowledge of A. The alteration is not
apparent to the naked eye. B then
deposited the altered check in his
account with PNB, which released it for
clearing. The BPI, the drawee bank,
did not notice the alteration and the
check therefore cleared. B was able to
withdraw the P2,800.00, after which,
he closed his account. When A
received his bank statement and
cancelled checks, he noticed the
discrepancy in the amount when he
compared the altered check with his
check stub. He immediately notified
BPI and demanded a recredit. BPI, in
turn, demanded recredit from PNB
which cannot now locate B. Can A
compel BPI to recredit his account? If
so, how much? Can PNB be compelled
to reimburse BPI of the amount the
latter may have recredit to the
account of A? Explain [1986 Bar
Examinations].

39. Maria issued a negotiable

promissory note and authorized Pilar
to fill up the amount in blank up to
P2,000.00 only. However, Pilar filled it
up to P4,000.00 and negotiated the
note to Pepe. For what amount are
Maria and Pilar liable to Pepe? Explain
[1972 Bar Examinations].

38. Pedro writes out a check for

P1,000.00 in favor of Jose or order
against his current account with the
Bank of America. Juan steals the
check, erases the name of Jose and
superimposes his own name. Juan
deposits the check at Citibank and
after clearing, Juan withdraws the
amount and absconds. Upon discovery
by Pedro of the material alteration, he
lodged a complaint at the Bank of
America, who debited the amount to
Pedro. Bank of America demands
reimbursement for Citibank which

41. X makes a promissory note for

P10,000.00 payable to A, a minor, to
help him to buy school books. A
endorses the note to B for value, who
in turn endorses the note to C. C
knows A is a minor. If C sues X on the
note, can X set up the defenses of
minority and lack of consideration?
Explain [1998 Bar Examinations].

40. A executed a bill of exchange for

P500.00 in favor of B, who altered the
amount to P5,000.00 and presented
the bill to the drawee for acceptance.
The drawee, not knowing of the
alteration which was neatly done,
accepted the bill. Thereafter, N
negotiated the bill to C, who now
seeks to hold the drawee liable for
P5,000.00. The drawee contends that
under the rule on alteration, he can
only be liable up to P500.00. Is the
drawees contention tenable? Can the
drawee debit the amount of A, and if
so, to what extent? Reasons [1971 Bar
Examinations].
I. MINORITY

42. X, without receiving consideration

therefor, makes a promissory note for
P500.00 payable to A, a minor, to help
him buy school books. A indorses the
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note to B, who, in turn, indorses the

note to C. C knows As minority. If C
presents the note to X for payment,
what are the possible defenses to be
interposed by X? If C sues X on the
note, can X set up the defense of
minority and lack of consideration?
Explain [1989 Bar Examinations].

WARRANTIES/LIABILITIES
J. ACCEPTOR
43. X draws a check against his
current account with Ortigas Branch of
Bonifacio Bank in favor of B. Although
X does not have sufficient funds, the
bank honors the check when it was
presented to payment. Apparently, X
has conspired with the banks
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 [1998
Bar Examinations].

K. NEGOTIATOR BY DELIVERY
44. Anna makes a promissory note
payable to bearer and delivers it to
Bing. In turn, Bing negotiates it by
mere delivery to Carmen, who
indorses it specially to Dong. Dong
negotiates it by special indorsement to
Emma, who negotiates it to Fe by
mere delivery. Anna did not pay. To
whom are Bing and Carmen liable? To
whom are Dong and Emma liable?
Explain [1988 Bar Examinations].

45. Alex issued a negotiable

promissory note (PN) payable to
Benito or order in payment of certain
goods. Benito indorsed the PN to Celso
in payment of an existing obligation.
Later, Alex found the goods to be
defective. While in Celsos possession,
the PN was stolen by Dennis who
forged Celsos signature and
discounted it with Edgar, a money
lender who did not make inquiries
about the PN. Edgar indorsed the PN
to Felix, a holder in due course. When
Felix demanded payment of the PN
from Alex, the latter refused to pay.
Dennis could no longer be located.
What are the rights of Felix, if any,
against Alex, Benito, Celso and Edgar?
Explain. Does Celso have any right of
action against Alex, Benito and Felix?
Explain [1995 Bar Examinations].
46. A drew a check for P1,000.00 on B,
the Bank payable to the order of C and
delivered the check to the latter for
value. C indorsed the check in blank
and negotiated it to D, who lost it. At
Ds request, A ordered payment
stopped by notifying B. The stop
payment order was overlooked and
the check was paid to E, who had
taken the check, without actual
knowledge of the loss, in payment of
merchandise sold to a stranger whom
he thought owned the check. D now
sues the bank. Decide the case with
brief reasons [1979 Bar Examinations].

INCIDENTS
M. NEGOTIATION

L. INDORSERS

47. Richard Clinton makes a

Page 8 of 9

promissory note payable to bearer and

deliverrs the same to Autora Page. The
latter, however, endorses it to X in this
manner: Payable to X, Signed: Aurora
Page. Later, X, without endorsing the
promissory note, transfers and
delivers the same to Napoleon. The
note is subsequently dishonored by
Richard Clinton. May Napoleon
proceed against Richard Clinton for
the note? [1998 Bar Examinations].
48. On November 3, as payment for
goods received, A gave to B his check
drawn on PNB, Manila. B thereafter
negotiated the check to C. On
November 10, C could not encash the
check because the Bangko Sentral had
forbidden PNB to do business on
grounds of insolvency. Can C hold A
liable on the uncashed check? Can C
hold B liable instead on the uncashed
check? Explain. If you were B, how
would you negotiate the check to
negate future liability thereon? Explain
[1987 Bar Examinations].

N. DISHONOR

49. When is notice of dishonor not

required to be given to the drawer?
[1996, Bar Examinations].
50. A issued a promissory note to B
dated January 1, 2002, in the following
tenor: I promise to pay to the order of
B P1,000.00 sixty days after date.
(Sgd.) A. The note was subsequently
negotiated with proper indorsement
by B to C, C to D, and D to E, the
holder. When E presented the note for
payment to A, the latter refused to
pay. E then gave a notice of dishonor
to C only. May E immediately proceed
against B, C or D? What should C do to
protect his rights, if any, against A, B
and D? Explain [1984 Bar
Examinations].
51. X draws a bill of exchange against
Y in favor of W for P1,000.00,
requesting the drawee to pay on
December 24, 1962. W indorses the
instrument to P on September 1 and
on September 15 presents it for
acceptance. The bill is dishonored. P
promptly sues W for payment. Will the
case prosper? Give reasons for your
answer [1963 Bar Examinations].

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