TAKE HOME FINAL EXAMS

Atty Yen Mendoza-Clavano

Please answer the exam questions by pair. Below are the pairs/triad. The pair/triad that will get the
highest score will have an additional 20 points in the final exam grade. Submit your answers via email in
a WORD Format - PDF file to reyaine87@gmail.com. Deadline of submission is on December 5, 2018
until 5:00 PM. Those that are received beyond 5:00PM on December 5, 2018 will automatically get a
final grade of zero.

Pairs/Triad:
Lulu & Fabon
Bayot & Macabuhay
Orbe & Gabica
Bagon & Antonio
Felipe &Espinosa & Gallos

A. FILL IN THE BLANKS

Identify what defense is applicable with the following infirmities or defects. Write P if the answer
is Personal Defense and R if Real Defense.

____1. Want of delivery of incomplete instrument

____2. Forgery
____3. Fraud in inducement
____4. Absence or failure of consideration
____5. Minority
____6. Filling up of blanks not in accordance with authority given
____7. Insertion of a wrong date
____8. Fraud in factum
____9. Discharge
____10. Acquisition of signature by force or fear
____11. Negotiation of instrument by breach of faith
____12. Illegality of contract
____13. Renunciation or release before maturity
____14. Duress amounting to forgery
____15. Fraud in esse

B. Answer the questions concisely. (35 Points)

1. What is the function and importance of negotiable instruments?(2 pts)

2. Who are the parties to a bill of exchange and define each party. (5 pts)
3. What are the requisites of negotiability? (5 pts)
4. Which one is negotiable, a fund for reimbursement or a particular fund for payment?
Explain the answer you chose. (3 pts)
5. How is an order instrument negotiated? (2 pts)

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 6. How is a bearer instrument negotiated? (2 pts)
7. What is a Holder in Due Course? (4 pts)
8. What is the difference between a Holder in Due Course and a Holder Not in Due Course?
(5 pts)
9. What are the warranties of a general indorser? (3 pts)
10. How does an agent avoid personal liability on the instrument? (4pts)

C. TRUE OR FALSE

____1. A conditional indorsement renders the instrument non-negotiable.

____2. Absence or failure of consideration is a matter of defense as against any person not a
holder in due course.
____3. An order or promise to pay out of a particular fund is not negotiable.
____4. An order or promise to pay is unconditional though coupled with an indication of
particular fund out of which reimbursement is to be made.
____5. The acceptor admits the existence of the drawer, the genuineness of his signature and
his capacity and authority to draw the instrument.
____6. Where the instrument is payable to order, the payee must be named or otherwise
indicated therein with reasonable certainty.
___7. Every negotiable instrument is deemed prima facie to have been issued for a valuable
consideration, and every person whose signature appears thereon to have become a
party thereto for value.
____8. An accommodation party is liable on the instrument to a holder for value,
notwithstanding such holder at the time of taking the instrument knew him to be only
an accommodation party.
____9. A signature by “procuration” operates as notice that the agent has but a limited
authority to sign, and the principal is bound only in the case the agent in so doing acted
within the actual limits of his authority.
____10. An antedated or postdated instrument is valid, and it does not lose its negotiable
character just because it is antedated or postdated, provided this is not done for an
illegal or fraudulent purpose.
____11. An instrument where no time of payment is expressed is payable on demand.
____12. Where the instrument is not dated, it will be considered to be dated as of the time it
was issued.
____13. An instrument which contains an order or promise to do any act in addition to the
payment of money is not negotiable.
____14. An instrument payable upon contingency is not negotiable and the happening of the
event does not cure the defect.
____15. Where a signature is so placed upon the instrument, that it is not clear in what capacity
the person making the same intended to sign, he is deemed an indorser.

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D. Please answer as thoroughly as possible citing the law and the case doctrines as
discussed in class.
1. A check for P50,000.00 was drawn against drawee bank and made payable to XYZ
Marketing or order. The check was deposited with payee‘s account at ABC Bank which
then sent the check for clearing to drawee bank. Drawee bank refused to honor the check
on ground that the serial number thereof had been altered. XYZ marketing sued drawee
bank A.

a. Is it proper for the drawee bank to dishonor the check for the reason that it had been
altered? Explain. (5 pts)

b. In the 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. (5 pts)

2. CX maintained a checking account with UBANK, Makati Branch. One of his checks in a
stub of fifty was missing. Later, he discovered that Ms. DY forged his signature and
succeeded to encash P15,000 from another branch of the bank. DY was able to encash
the check when ET, a friend, guaranteed due execution, saying that she was a holder in
due course. Can CX recover the money from the bank? Reason briefly. (5 pts)

3. Jose loaned Mario some money and, to evidence his indebtedness, Mario executed and
delivered to Jose a promissory note payable to his order. Jose endorsed the note to Pablo.
Bert fraudulently obtained the note from Pablo and endorsed it to Julian by forging
Pablo‘s signature. Julian endorsed the note to Camilo.

a. May Camilo enforce the said promissory note against Mario and Jose? (2pts)
b. May Camilo go against Pablo? (2 pts)
c. May Camilo enforce said note against Julian? (2 pts)
d. Against whom can Julian have the right of recourse? (2 pts)

4. Reeno bought a motor vehicle from Yats Motor Sports Co for Php 200,000 as evidenced
by a promissory note. This note was subsequently endorsed to Anne Finance and Leasing
Co which financed the purchase. Reeno defaulted in his installments allegedly due to a
discrepancy in the engine and chasis numbers of the vehicle delivered to him and those
indicated in the sales invoice, certificate of registration, and deed of chattel mortgage
which fact he discovered when the vehicle figured in an accident.

Anne Finance and Leasing Co filed a complaint for recovery of a sum of money against
Reeno. Reeno contended that Yats Motor Sports Co imputed fraud, bad faith and
misreprepresentation for having delivered a different vehicle to him, thus he is relieved
from his obligatin and Anne Finance and Leasing Co’s cause of action is against Yats Motor
Sports Co.

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 a. Is Anne Finance and Leasing Co a holder in Due Course? (5 pts)

5. Supposing Reeno bought a car from Yats owned by Diaz Clinic, represented by Saniata
Corpuz who claimed to be duly authorized to look for a buyer. Saniata Corpuz
recommended Reeno to issue a crossed check in the amount of Php 5000 as evidenced
of his good faith and added that it will only be for safekeeping and will be returned to
him the following day. The next day Saniata Corpuz never appeared. Reeno issued a Stop
Payment Order on the check. Saniata Corpuz used the check to pay Diaz Clinic for the
hospitalization fees amounting to P 2000. Dr Diza deamnds payment for the check. Reeno
refused and argued that Dr. Diaz is not a holder in due course.

a. Is Dr. Diaz a holder in due course entitled to recover the value of the check (2
pts)
b. Supposing Dr. Diaz contends that a possessor of the instrument is prima facie
a holder in due course. Would you uphold her contention? (2pts)
c. Discuss the effects of the issuance of a crossed check. (3 pts)

6. X makes a promissory note for P10,000 payable to A, a minor, to help him 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?

7. To accommodate Carmen, maker of a promissory note, Jorge signed as indorser thereon,

and the instrument was negotiated to Raffy, a holder for value. At the time Raffy took the
instrument, he knew Jorge to be an accommodation party only. When the promissory
note was not paid, and Raffy discovered that Carmen had no funds, he sued Jorge.
Jorge pleads in defense the fact that he had endorsed the instrument without receiving
value therefor, and the further fact that Raffy knew that at the time he took the
instrument Jorge had not received any value or consideration of any kind for his
indorsement. Is Jorge liable? Discuss.

8. A, single proprietor of a business concern, is about to leave for a business trip and, as he
so often does on these occasions, signs several checks in blank. He instructs B, his
secretary, to safekeep the checks and fill them out when and as required to pay accounts
during his absence. B fills out one of the checks by placing her name as payee, fills in the
amount, endorses and delivers the check to C who accepts it in good faith as payment for
goods sold to B. B regrets her action and tells A what she did. A directs the Bank in time
to dishonor the check.
When C encashes the check, it is dishonored. Can A be held liable to C?

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 E. Warehouse Receipts Law
Duties of Warehouseman

A. Delivery of Goods

1. One of these is not required to bind the warehouseman to deliver the goods:

a. An offer to satisfy his lien.

b. An offer to surrender the receipt, if it is negotiable, with indorsements
necessary for its negotiation.
c. A readiness and willingness to sign upon delivery of the goods, an
acknowledgment that they have been received, if the warehouseman
requests it.
d. An undertaking to hold the warehouseman harmless from claims of third
parties.

2. One of these statements is not correct:

a. The general rule is that a warehouseman cannot invoke the right or title
of a third person as an excuse for not delivering the goods covered by a
receipt.
b. By way of exception, the warehouseman may withhold delivery until he
has had reasonable opportunity to ascertain the validity of the claim of
the third party or to file an action for interpleader.
c. If the goods were lawfully sold to satisfy the lien of the warehouseman
or were lawfully sold or disposed of because of their perishable or
hazardous nature, the warehouseman is not liable for not delivering
them.
d. If the warehouse receipt was fraudulently altered, the warehouseman
will be discharged from liability to deliver the goods.
Safekeeping of the Goods

3. One of these statements is not correct:

a. A warehouseman is liable for any loss or injury to the goods caused by his
failure to exercise such care as a reasonably careful owner would
exercise.
b. In the absence of a stipulation to the contrary, the warehouseman is not
liable for any loss or injury to the goods which could not have been
avoided by exercise of such care.
c. A warehouseman is not liable for loss due to a fortuitous event.

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 d. The person claiming the goods has the burden of proving the loss was
due to the fault of the warehouseman.

Warehouseman’s Lien

4. One of these statements is not correct:

a. A warehouseman has a lien on the goods deposited or their proceeds in

his hands for all lawful charges for storage and preservation of the goods,
for all lawful claims in relation to the goods, for all reasonable charges
and expenses for notice and advertisement for sale, and for sale of the
goods.
b. If the receipt is negotiable, the warehouseman will have no lien on the
goods except charges for storage, unless the receipt expressly
enumerates other charges for which a lien is claimed.
c. A warehouseman has a lien against all goods belonging to the person
liable for the claims with respect to which a lien is asserted.
d. A warehouseman cannot have a lien against the goods if the depositor
was merely entrusted with its possession, even if the warehouseman
acted in good faith and for value.

Enforcement of Warehouseman’s Lien

5. One of these statements is not correct:

a. A warehouseman’s lien may be satisfied by selling the goods.

b. The warehouseman must give the person for whose account he is holding
the goods or any other person he knows to claim an interest in the goods
notice to pay within ten days.
c. If the warehouseman is not paid, an advertisement of the sale must be
published once a week for three consecutive weeks in a newspaper
published in the place of the sale.
d. The sale cannot be made less than 15 days before the date of the first
publication.