ANSWER THESE PROBLEMS USING “ALAC” METHOD EXCEPT PROBLEMS 4,

5, 9 and 10. USE ANY APPLICABLE THE NIL, THE NEW CIVIL CODE, AND THE
CODE OF COMMERCE AS WELL AS JURISPRUDENCE.

1. Mr. A, the debtor, owes Mr. B, the creditor, the amount of P1,000.00 evidenced by a non-
negotiable promissory note payable on January 15, 2020. On December 2, 2019, Mr. B,
without the knowledge and consent of Mr. A, agreed to transfer the right to collect from Mr.
A to Mr. C for P900.00. Mr. B delivered the promissory note to Mr. C on December 2, 2019
at which time payment was also made by Mr. C to Mr. B. On January 16, 2020, Mr. A paid
Mr. B upon demand of the latter not knowing that there was a previous transfer. Mr. C is
now demanding payment from Mr. A, will the demand prosper?

2. Mr. A, the debtor, owes Mr. B, the creditor, the amount of P1,000.00 evidenced by a non-
negotiable promissory note payable on February 1, 2020. On January 2, 2019, Mr. B, with
prior notice to but without the consent of Mr. A, transferred his right (to collect from Mr. A)
to Mr. C for P900.00. Mr. B delivered the promissory note to Mr. C on January 2, 2019 at
which time payment was also made by Mr. C to Mr. B. At that time, Mr. A had more than
sufficient properties to pay his obligations. On February 2, 2020, Mr. A was not able to pay
because he was insolvent despite demand from Mr. C. Mr. C is now demanding payment
from Mr. B on the ground that Mr. B is responsible for the fact that Mr. A is now insolvent.
Is the position of Mr. C tenable?

3. On January 2, 2019, Mr. B transferred his supposed right over a non-negotiable

promissory purportedly signed by Mr. A to Mr. C for P900.00. Mr. B delivered the non-
negotiable promissory note to Mr. C on January 2, 2019 at which time payment was also
made by Mr. C to Mr. B. The non-negotiable promissory note in favor of Mr. B, the creditor,
states that Mr. A promised to pay Mr. C the amount of P1,000 on or before February 1,
2020. However, it turned out that Mr. A did not actually sign the promissory note and is
not, in fact indebted to Mr. B. On February 2, 2020, Mr. A refused to pay despite demand
from Mr. C. Mr. C is now demanding payment from Mr. B on the ground that Mr. B is
responsible for breach of warranty. Is the position of Mr. C tenable?

4. What are the differences between conventional subrogation and assignment of credits?

5. What are the differences between negotiable instruments and non-negotiable

instruments?

6. Mr. A, the debtor executed a non-negotiable promissory note payable on February 1, 2018
in favor of Mr. B, the creditor, whereby Mr. A promised to pay Mr. B the amount of
P1,000.00. The note was executed because Mr. A’s relative was kidnapped by Mr. B. On
June 2, 2017, Mr. B, with prior notice to but without the consent of Mr. A, transferred his
right to collect from Mr. A to Mr. C for P800.00. Mr. C, in turn transferred the same credit
to Mr. D on September 1, 2017 for P900.00. Both Mr. C and Mr. D received the promissory
note at the time of the transfer but both were not aware of the consideration for the
issuance of the note. Mr. D is now demanding payment from Mr. A but the latter refused
citing illegality of consideration. Mr. D is claiming that he can recover from Mr. A because
he (Mr. D) is allegedly a transferee in good faith and for value. a) Did Mr. A validly refuse
to pay Mr. D? b) If your answer is yes, what is the remedy of Mr. D? c) Can Mr. D claim
against Mr. B?

7. Spouses R executed and delivered to TS, Inc. a promissory Note (PN) payable in
monthly installment with an agreed specific amount per installment starting from August
2015 up to August 18, 2016. 
The spouses executed a Chattel Mortgage (CM) in favor of TS
Inc. covering the car that they purchased to secure the payment of the PN. TS later
assigned all its rights, title, and interest in the mortgage to F Bank. On June 2016, F Bank
sent a formal demand to the spouses claiming that the latter failed to pay 4 monthly
amortizations. 
Spouses refused claiming that they delivered negotiable post-dated checks
to Bank to cover all installments and were 
able to show the Acknowledgment Receipt from
F Bank. 
The spouses argued that they did not receive any notice from the drawee banks
nor from F Bank that these checks were 
dishonored. Considering that the checks were
issued three years ago, they believed in good faith that their obligation had already been
paid.
 On the other hand, F Bank argued that they had received the post-dated checks from
the spouses but 2 of those checks were dishonored and 2 other checks were not deposited
anymore due to the previous dishonor. Hence, F Bank claims that Spouses R had a
remaining outstanding balance. Spouses R countered that they have established payment
of the amount being claimed and, unless the F Bank proves that the checks have been
dishonored, they should not be made liable to pay the obligation. Are the arguments of
Spouses R correct?

8. Suppose in problem No. 7, the parties did not sign both the PN and the CM, is there still
proof of the obligation? Use and cite applicable jurisprudence to justify your answer.

9. Prepare a negotiable promissory note.

10. Prepare a negotiable bill of exchange.