contends that they should 1. MINORITY (PERSONAL) not be liable because the one who signed the check as an X makes a promissory note accommodation party is for P500 payable to the Movers Enterprises. order of A, to help him buy school books. A indorses the Issue: Can a corporation be note of B who, in turn held liable as an indorses the note to C. C accommodation party? knows As minority. If C sues the note to X on the note, Held: NO. The issue or can X set up the defense of indorsment of negotiable minority and lack of paper by a corporation consideration? (1989 Bar). without consideration and for the accommodation of A: NO. X cannot set up the another is ultra vires. Hence, defense of minority of A. one who has taken the Although minority is a real instrument with knowledge of defense, such defense is the accommodation thereof personal to the minor and cannot recover against a cannot be invoked by other corporation where it is only parties. This is specially true an accommodation party. in the case of X, the maker, Officers have no power to who warrants that the payee execute for mere has the capacity to contract. accommodation a negotiable X is therefore barred from instrument of the corporation claiming that the payee is a for their individual debts or minor because of his transactions arising from or warranties. in relation to matter in which corporation has no legitimate 2. ULTRA VIRES ACT concern. (REAL) However as an exception, officers can issue a Case of Crisologo-Jose v CA. negotiable paper in the name Facts: Atty. Benares of corporation for the (President) and Santos (VP) accommodation of a third of Mover Enterprises drawn a person only if specially check under the account of authorized to do so. Mover in accommodation of its clients payable to 3. NON-DELIVERY AND Crisologo-Jose. However, the CONDITIONAL check was dishonored due to DELIVERY insufficiency of funds. Crisologo filed a case of BP 22 against Benares and A. NON-DELIVERY OF Nazareno immediately filled INCOMPLETE INSTRUMENT the amount of P50,000 and (REAL) fictitious name as a payees name and passed it to 1. Jose makes a note payable Roldan. Thereafter, Roldan to bearer with the amount endorsed the check to Dante. blank and delivers it to Karen for safekeeping. Marina fills a. Can Dantes enforce the up the note for P20,000 and check against Jose Reyes? negotiates it to Adriano. Can Answer: NO. Dantes Jose dishonor the note and cannot enforce the refuse payment to Adriano on instrument against Jose the ground that the note was Reyes. Reyes can raise the incomplete and was originally defense that the delivered to Karen for incomplete instrument safekeeping? (1997 Bar) was not delivered since the check was only stolen Answer: YES, Jose can and filled up by Nazareno. dishonor the not. Jose can b. What if Dantes is a HIDC? invoke the non-delivery of an A: NO. If an incomplete incomplete instrument. instrument has not been Although Jose delivered the delivered, it will not, if instrument to Karen for completed and negotiated safekeeping, it is not clear without authority be a how Marina obtained the valid contract against any instrument. When an holder even a holder in incomplete instrument has due course. not been delivered, it will not, if completed and negotiated 3. A signed a blank check without authority, be a valid which he had contract in the hands of any inadvertently left on his holder as against any person desk at his Escolta whose signature was placed Office. The sane was thereon before delivery (Sec. later stoln by B, who 15). It does not matter if filled the amount of Adriano is a holder in due P22,300 and a fictitious course because the defense name as a payee. B involved a real defense. then endorsed the check to C, then C to D, 2. Jose Reyes has signed a then D to E, and E to F. blank check, and in his haste to attend a party, left the a. Can F enforce the check in his desk. Later, instrument against A? Nazareno forced open the A: NO, F cannot enforce door to Reyes office, and the instrument against stole the blank check. A. The instrument was an incomplete dishonor are duly taken instrument and was not and F obtained his title delivered. It was through indorsement of likewise not delivered C. An indorser is liable with the authority of A. for breach of Hence, it is not a valid warranties. contract in the hands of any holder. 4. FILLING UP BLANKS b. Suppose F is a HDIC, BEYOND AUTHORITY will your answer in A (PERSONAL) will be the same? 1. Larry issued a A: Yes. Non- Delivery of negotiable promissory an incomplete note to Evelyn and instrument is a real authorized the latter to fill defense that can be up the amount in blank raised against a holder with his loan account in in due course. the sum of P1,000. c. Can F enforce the However, Evelyn inserted instrument against B? P5,000 in violation of the A: YES. F can enforce instruction. She the instrument against negotiated the note to B. His wrongdoing Julie who had knowledge prevented the recovery of the infirmity. Julie in from the maker, a turn negotiated said note wrongdoer should to Devi for value and who always be made liable had no knowledge of the for any damage infirmity. proximately caused thereby. Moreover, Can Devi enforce when the thief the note against Larry and endorsed the if she can, for how much? instrument in an Explain. assumed fictitious name, he warranted A: YES. Devi can enforce that the instrument in the instrument against all respects what it Larry. The defense of Larry purports it to be and is mere personal under that he has good title Section 14 of NIL. The law to it. Therefore, he is provides that if an liable for breach of instrument is wanting any warranty. material particular is d. Against C? completed beyond A: Yes if C enforsed the authority that was given, instrument provided it is valid and effectual for that the proper all purposes in the hands proceedings for of a holder in due course and he may enforce it as if material particular, the it had been filled up person in possession strictly in compliance with thereof has prima facie the authority given. Thus authority to complete it by Devi can enforce the filling up the blanks instrument against Larry therein. Any instrument for P5,000. that is completed is valid and effectual for all 2. A, single proprietor of a purposes in the hands of a business concern, is about holder in due course. to leave for a business trip and, as he often does on In fact, even if the these occasions, signs instrument cannot be several checks in blank. considered as actually He instructs B, his delivered when it was secretary to safekeep the delivered to the secretary, checks and fill them out the doctrine of when and as required to comparative negligence pay accounts during his prevents A from raising absence. B fills out one of the same as defense. As the checks by placing her between A and C, both name as payee, fills the innocent parties, it was amount and endorses and the negligence of A in delivers the check to C entrusting the check to B who accepts it in good which is the proximate faith as payment for the cause of the loss. goods sold to B. B regrets her action and tells A what 5. FRAUD she did. A directs the Bank in time to dishonor the 1. A induces B by fraud to check. When C encashes make a promissory note the check, it is dishonored. payable on demand to the Can A be held liable to C. order of A in the sum of P5,000. A: YES. A can be held a. Can A file an action liable by C., provided that successfully against B the appropriate for the amount of the proceeding for dishonor be note? duly taken. The A: NO. B may raise the instrument in this case defense of fraud in was an incomplete inducement against A instrument but delivered who is not a holder in as it was entrusted to B, due course. This is the secretary of A. Under specially true where A Section 14 of NIL, when an was the one who instrument wanting any fraudulently induced B Honesto withdrew the to issue the note. amount of P15th from b. Going further, A Shure Bank and transfers the note to C disappeared. After who pays P5,000 receiving his bank therefor and acquires statement, Mario the note under the discovered the alteration circumstances that and demanded restitution make C a holder in due from Progressive Bank. course. Can C file an Discuss fully the rights action successfully and the liabilities of the against B, the maker parties concerned. of the note, for the amount thereof? A: Progressive Bank, the A: Yes. C is presumed drawee of the check, to be a holder in due should comply with the course. Hence, in the demand of Mario for the absence of proof that restitution of the amount he is not, he is a of P150,000 to his holder in due course account. Progressive who is free from Bank has no right to personal defense deduct such amount from including fraud in Marios account. The inducement. order of Mario is to pay P50,000 and material 6. MATERIAL ALTERATION alteration avoids the instrument. Progressive 1. Mario Guzman issued to Bank is also responsible Honesto Santos a check for negligence of its for P50th as payment for employees in not noticing a 2nd hand car. Without the alteration. the knowledge of Mario, Honesto changed the As between amount to P150th which Progressive and Shure, alteration could not be the latter is not liable detected by the naked provided no negligence eye. Honesto deposited can be ascribed to the altered check with Progressive. As a Shure Bank which collecting bank, Shure forwarded the same to warrants the genuineness Progressive Bank for of the check and that the payment. Progressive check is in all respect Bank without noticing the what it purports it to be. alteration paid the check, debiting P150th from the account of Mario. 2. In consideration of those who made, some goods he bought, A authorized and assented issued to B a the alteration and personal check in the subsequent indorsers. B, amount of P280.00 which the holder of the check is B altered to not a holder in due P2,800.00 without the course and he was even knowledge of A. The the one who caused the alteration is not alteration, hence, the apparent to the naked instrument is avoided as eye. B then deposited the to B. altered check BPI can in turn, in his account with PNB, collect whatever amount which released it for that it returned to A from clearing. The BPI, the collecting bank, PNB. the drawee bank, did not The alteration is covered notice the alteration and by the warranties of a the check collecting bank. If the therefore cleared. B was clearing was done able to withdraw the through PCHC, the P2,800.00, after drawee can file a claim which, he closed his against the collecting account. When A received bank within the period his bank prescribed by law. statement and cancelled Whatever amount checks, he noticed the that may be paid by the discrepancy in collecting bank can be the amount when he recovered from B. compared the altered check with his check 7. ABSENCE OR FAILURE stub. He immediately OF CONSIDERATION notified BPI and 1. NM issued 2 PDC to CV demanded a recredit. BPI, as security for prices of in turn, demanded jewelry to be sold. Each recredit from PNB which check has the face cannot now locate B. value of P50,000. Discuss the rights Thereafter, CV and liabilities of the negotiated the check to parties under the SIH without the circumstances. knowledge of NM. NM returned the jewelries A: BPI should recredit the to CV and tried to account of A. Under retrieve the checks. Section 124 of the NIL, a Having failed to do so, material alteration avoids NM withdrew her funds the instrument, except to from the bank and the checks were the check, the drawee subsequently bank dishonored it. dishonored when If Fund House files a presented for payment. complaint against SIH sued NM who Pentium and CD Bytes interposed the defense for the payment of the that the checks do not dishonored check, will have any the complaint prosper? consideration. However, NM did not A: The complaint will present proof that SIH prosper only against CD is not a HIDC. Will the Bytes but not PC. Fund defense of absence of House is not a HIDC consideration prosper because it took the against SIH? crossed checks that A: NO. NM cannot were meant for invoke the defense of Pentium. A person who absence of took crossed checks is consideration against deemed to been SIH. There is no warned of the purpose showing that SIH is not of the checks and he is a HIDC, hence, the not bound to inquire presumption on due from the original parties course holding stands. regarding the As a holder in due circumstances with course, SIH is free from respect to its issuance. personal defenses of Had it inquired from the prior parties. parties, it would have discovered that there 2. On March 1, 1996, PC was non-delivery of the company ordered a computer. Consequenlt computer from CD such non-delivery or Bytes and issued a failure of consideration crossed check in the can be raised as a amount of P30,000 defense by PC against posy dated March 31, Fund. 1996. Upon receipt of The complaint will the check, CD Bytes prosper against CD discounted the check Bytes because Fund with Fund House. House can enforce its On April 1, 1996, PC contract. An immediate stopped payment of party is liable to his the check for failure of contracting party CD to deliver the computer, thus, when 8. FORGERY IN NOTES Fund House deposited a. Makers Signature 1. M, maker, prepared a because his promissory note payable wrongdoing prevented to the order of A, but he recovery from M. He is did not signed the same in effect the maker of and left it inside his the instrument. drawer. X, a thief stole the instrument, forged b. Will your answer Ms signature and will be the same if delivered the same to A, the instrument is a A then indorsed the bearer instrument? instrument to B, B then A: Yes the answer indorsed it to C, then C to would still be the D, the present holder. same if the a. Against whom can instrument is a D enforce payment? bearer instrument . A: D can enforce The forged payment from X, A, B signature of M is and C but not against still inoperative as M. Under Section 23 of to him. the NIL, the forged The indorsers signature of M is are still secondary wholly inoperative and liable because the no right to enforce NIL provides that payment was acquired person who indorse against M by virtue of a bearer the forged signature. instruments are liable to subsequent However, indorsers A, parties who B and C are made acquired title liable because they are through their parties after the indorsement. In this forgery and are case, D acquired therefore precluded title through the from setting up forgery indorsement of A, B against the present and C. holder, D. When A, B and C indorsed the b. Indorsers Signature instrument, they 1. Jose loaned Mario some warranted that the money and, to evidence his instrument is genuine indebtedness, Mario and in all respects executed and delivered to what it purports to be. Jose a promissory note payable to his order. Jose On the other hand, the endorsed the note to Pablo. forger will be deemed Bert fraudulently obtained the principal debtor the note from Pablo and endorsed it to Julian by right against Mario and Jose forging Pablos signature. who were parties prior to Julian endorsed the note to forgery. Camilo. b. May Camilo go against a. May Camilo enforce the Pablo? said promissory noteagainst A: Camilio has no recourse Mario and Jose? against Pablo because he did A:Camilo may not enforce not transfer his right over said promissory note against the instrument. He did not Mario and Jose. The indorse or deliver the promissory note at the time instrument. of forgery being payable to c. May Camilo enforce said order, the signature of Pablo note against Julian? was essential for the A: instrument to pass title to d. Against whom can Julian subsequent parties. The have the right ofrecourse? signature of the indorser, Jose, was forged, hence such signature was wholly inoperative and no right to enforce payment is acquired by virtue of the forged indorsement. (Sec 23 NIL). Camilio did not acquire any