Nego 1. Atty Gapuz

7/28/2019 Nego 1. Atty Gapuz

1/8

Commercial Law ReviewTranscription of Lecture by Atty. Minda C. GapuzPLM College of Law November 12, 2011

Transcribed by: JMQuibolen Page 1 of 8

Well this subject is composed of so many laws.

You have negotiable instruments law, you

have transportation law, corporation law,

insurance law, banking laws, revised securities

act, intellectual property and then the small

laws. For small laws we have trusteeship law,letters of credit, well the banking laws are so

many, Chattel mortgage law, real estate

mortgage law. We will first tackle the big laws.

There are 7 of big laws. Well dont worry we will

finish before the end of the semester. Thats

why we have to budget our time for Nego, we

have 2 meetings only, for transpo: 1 meeting

only, for insurance: 2 meetings, for corporation

marami ito we shall have 3, banking laws: 1,

Revised securities act: 1, intellectual property

code: 1, we have 11 Saturdays. Can you check

your calendar kung kelan yung pang 11? You

remove the holidays. Dont include today.

When will that be? February 11. When are the

final exams? March 10. Okay so we are within

the schedule because the rest will be devoted to

small laws and special laws related to

commercial laws. Okay first subject we shall

tackle before transportation is negotiable

instruments law. In the meantime, I will give

you a syllabus of the 3 subjects. Kaya lang this

is not really a syllabus. These are my notes of

the subjects. These are the important features

of the 3 subjects. You take care of the rest. You

must have a codal. Vol 1 and 2 of CommercialLaw. Just the codal. You know why because of

the multiple choice. But you should not be

absent because during my lecture, in my

examples and discussion I will be discussing

some decisions of the Supreme Court. My

examples are lifted from decisions of the SC.

Talaga yung secretary ko mahilig sa text.

Anyway bahala na kayo mahilig naman kayo sa

text eh. Well these notes does not mean na eto

lang pagaralan nyo. I just gave the important

features of the subject which you should

remember but it does not mean that these are

what you will only study. Kaya nga I said youshould have a codal. Well since you are my

students you already know my style: Recitation,

Lecture, Exams, Surprise Quiz. During

recitation, close notes. Nobody will open notes

or books. Okay for now pagbigyan ko kayo

although I gave you an assignment. Who was

your professor in Nego? You po. Lahat ba kayo?

Yes. Eh di na natin idiscuss.

Okay reminder na lang. I emphasized Sec 1

which you should memorize from the very

beginning. You should memorize that because

now there are so many commercial documents.

And the negotiable instrument is one of them.

There are so many commercial documents andyou may not be able to determine whether this is

negotiable or not, that is why you have to

memorize Sec 1 because these elements are

concurring. Meaning, the absence or defect of

one element would render the instrument non-

negotiable. And if you recall our discussions

before there are so many commercial

documents, you have credit cards, letters of

credits, warehouse receipts, treasury bonds.

These are not negotiable instruments although

they are commercial documents and valid

contracts also. So that all negotiable

instruments are contracts but not all contracts

are negotiable instruments. Because of that you

have to apply Sec 1 because negotiable

instruments are commonly and widely used now

because of its convenience and the ease of

transferring. The words negotiable makes that

instrument very easy to transfer by indorsement

lang. So for other contracts, contracts can also

be transferred from one person to another kaya

lang you have to execute a separate document or

deed or separate contract to transfer that

contract like deed of assignment, deed of sale,

deed of donation. So there are so many kinds ofdeeds to transfer a contract. But if it qualifies

as a negotiable instrument because all the

elements of Sec 1 are present, then the mode of

transferring that would be by simply by

indorsement. Although there are many kinds of

indorsement which we have discussed before

but the fact that indorsement is one of the

modes of transferring of instrument, there is a

need for the transferor or indorser to sign that in

order that the indorsee has the right to retain it

or enforce it against prior parties and has the

right to be given discharge of the instruments.

Okay that is the beauty of negotiableinstruments, the accumulation of several

contracts and how will you accumulate? By the

mere indorsement that is already accumulation

of contract because when you indorse a

negotiable instrument there is an agreement

between you and the transferee or indorsee. It is


2/8



very important that you memorize Sec 1.1

Remember that these are concurring elements

such that in a multiple choice, supposing the

elements are there. The following are requisites

of a negotiable instrument: a, b, c, d, e, any of

the above or all of the above. Alin any of theabove or all of the above? All of the above kasi

concurring, all must be present hindi pwede

yung any of the above.

So, there are 2 general classifications of

negotiable instrument, you have the negotiable

promissory notes and negotiable bills of

exchange. I specified negotiable because a PN

could also be a valid contract but not negotiable.

So what makes it non-negotiable. Supposing

you failed to pay your tuition fee and the school

would require you to execute a PN. It is a very

simple PN: I promise to pay PLM or order thesum of P21,000. Sgd. Negotiable or not?

Answer: Negotiable. The fact that it did not state

whether it is payable on demand or at a fixed

determinable future time, that is considered as

payable on demand.2 Because under Sec 7 the

fact that it is not dated or does not specify the

date when it is to be paid, it is still payable on

demand or the owner can always insert the true

date of issue or indorsement, that will not render

the instrument not negotiable. It would be

otherwise, if I promise to pay PLM P21,000.

That is not negotiable but it is a valid contract

between you and PLM. I would like to

emphasize that.

1Sec 1: Form of negotiable instruments. An instrument to be

negotiable must conform to the following requirements:

a. It must be in writing and signed by the maker ordrawer;

b. Must contain an unconditional promise or order to paya sum certain in money;

c. Must be payable on demand, or at a fixed, ordeterminable future time;

d.

Must be payable to order or to bearer: ande. When the instrument is addressed to a drawee, hemust be named or otherwise indicated therein with

reasonable certainty.2

Sec 7: When payable on demand. An instrument is payable on

demand:

a. When it is so expressed to be payable on demand, orat sight, or on presentation, or

b. In which no time for payment is expressed.Where an instrument is issued, accepted or indorsed when

overdue, it is, as regards the person so issuing, accepting or

indorsing it, payable on demand.

If you recall our study before, negotiable

instruments are only substitutes for money,

these are not legal tender and the Civil Code and

even Banking Laws provide that obligations

should be paid in Philippine currency and no

person can be compelled to accept a PN, a BE orany negotiable instrument. You cannot be

compelled to accept. Eh bakit pa natin

pinagaaralan? Because it is now widely

accepted or used and very convenient to use as

a substitute for money. Anyway, when the

instrument matures, you can now proceed and

present it to the principal and have it paid. Well

this very old. Older than the first constitution.

1911. Matandang matanda na itong law na to

that is why I discussed it first. And yet it is

widely used and there are so many controversies

regarding its usage and thats why the SC is

replete with cases regarding negotiable

instruments. So like bouncing checks. Checks

are special BE. Now if you know how the checks

operate, all negotiable instruments are also

transacted that way. The only difference is that

a check has limited indorsement because banks

do not allow 2nd indorsement except for valued

clients. So checks being negotiable instruments

have limited negotiation but for other negotiable

instruments they can be transferred so many

times even 100 times especially if the

instrument is payable to bearer because it does

not need indorsement, so the transfer, thenegotiation would be more than what you expect

because it is a substitute for money. Well our

Philippine peso is legal tender, however, it is also

a PN, payable to bearer. If you read what is

written in your Philippine bill, ang salaping ito

ay bayarin ng bangko sentral. So it is a bearer

PN of the Bangko Sentral, the negotiation or

transfer is by mere delivery. Pinipirmahan ninyo

ba yung peso pag itransfer nyo? Di ba it is a

bearer instrument. You dont transfer by

indorsement bawal pa ngang sulatan yang bill

nay an eh. Now if the state decides later on to

demonetize the Philippine peso or to change ourlegal tender into Philippine dollar, you will

surrender your bills and these will be paid by

Bangko Sentral through the commercial banks.

Because that is a bayarin ng Bangko Sentral, a

PN of the Bangko Sentral. Well you can make

your own negotiable instrument that is why

there are not so many forms of negotiable

instruments, you can make your own because


3/8



you just comply with the requisites and that is a

negotiable instruments as long as you comply

with the requisites If you recall again there are

more negotiable instruments in circulation than

our Phil peso or legal tender. Do you believe

that? Yes. There are more NI in circulation thatthe Phil peso. Okay just to give you 1 example,

if you buy a car, lets say 1M. You just made a

downpayment of 100,000. The balance in

installments, 5 yrs, 3yrs or 2 yrs depende. So

the dealer would ask you to sign a 2-page PN.

And if you examine carefully the document you

sign, it is a NI. Hindi naman ilalagay dun na

negotiable PN. Nakalagay lang dyan PN. It will

not state whether it is negotiable PN or not but

you have to read carefully kung negotiable ba to

or hindi thats why you need Sec 1 although

there are many negotiable instruments. Bonds

for example, bonds issued by the Bangko

Sentral, bonds issued by big corporations. Bakit

bonds? These are modes of generating capital

for a certain corporation. Corporation issues

bonds. The public will not be induced or enticed

by bonds kung hindi naman attractive yung

return of investments like yung interest. So if

the interest is big enough, you will be enticed to

buy bonds like bonds of the Bangko Sentral.

Even bonds issued by big companies like San

Miguel, Petron, Shell, mining companies, they

are issuing bonds and these bonds are PNs. So

nakalagay lang dyan bonds but if you read thecontents of these bonds they are negotiable PNs.

Nakalagay dyan I promise to pay _____ or holder.

Well its not as simple as what is written in text.

But in actual practice mahahaba yung nilalagay

dun. May nakalagay na interest, penalties,

escalation clauses, collateral, additional

collateral. In fact, if you have signed already a

negotiable PN for the balance of your

installment, some companies would actually

require you to issue post-dated checks, di

negotiable instrument na naman yan. Kaya for

a 1M car, you only paid 100,000, the balance is

PN. O di ba mas malaki, there are more NI incirculation than the legal tender. House and lot,

ganun din. You buy condominium ganun din.

Definitely you will be asked to sign something.

And that something is a PN, and that PN is

negotiable. Thats why all transactions need not

be settled in Phil currency or peso because of

the use of NI, we are accepting NI as a mode of

paying your obligation, although the civil code or

banking laws, that you cannot be compelled to

accept NI to pay your obligations although if you

recall again there are decisions of the SC also

which stated that in case of foreclosure of

mortgage, if you have a loan and secured by a

REM, when you are in default or unable to payyour loan, the bank will foreclose and the bank

will sell your property. Buyers will now become

the owner it and you exercise your right to

redeem and you have 1 yr to redeem your

foreclosed collateral w/in 1 yr from the date of

the sale. You can still buy back that property by

paying whatever your obligations with the bank.

So if you tender a check, sabi ng SC, when a

mortgagor redeems his property and tenders a

check to redeem a property, where the Lower

Courts denied the check as a tender of payment

because the lower court that no person can be

compelled to accept a check and all obligation

must be paid in Phil currency so sabi ng Lower

Courts hindi pwede yan, there are laws that

provide that all obligations must be paid in Phil

currency. To make the long story short, when

appealed to SC, anong sbi ng SC. IT reversed

the LCs decision because the tender of a check

is only a mode to exercise a right to redeem. So

the check was not used as payment of

obligation. It is only being tendered for purposes

for exercising the right under the law and that is

the right to redeem. So be careful with this.

Now the words Order or Bearer. Take note that

these are actually the most important elements

although as I said concurring elements, but

these are most important elements because

these are words of negotiability. Meaning,

without these you cannot transfer the

instrument by negotiation. The technical word

negotiation means you transfer that by

indorsement + delivery or if payable to bearer by

mere delivery. Thats why these are very

important in order to determine how will you

transfer that instrument from one person to

another. And in solving problems regardingforgery, the words order or bearer are very

important.

So we discussed before what forgery means and

remember that the rule on forgery is found


4/8



under Sec 233. And remember that in the case

of forgery, it makes that signature wholly

inoperative. Meaning, only that signature, not

the instrument, it does not render the

instrument wholly inoperative. Anong ibig

sabihin ng wholly inoperative? It is void againstthat person. It does not make the instrument

void, it is only void as to that person whose

signature was forged. So because of that forgery

is a real defense of a person whose signature

was forged. It is a real defense of anybody

whose liable in that instrument whether that

person is primarily liable, secondary liable. So

how was it negotiated, how was it transferred.

Was it an order instrument or a bearer

instrument? Because that will determine how

the instrument will be transferred and it will

also determine the liability of the different

parties.

So the most important stage of a life of NI is in

fact, negotiation. Kaya nga negotiable

instruments. That is the lifeblood of a NI. So we

mentioned about forgery. What is that? What is

forgery? How about alteration? Is forgery same

with alteration? Well forgery applies only to

signature, the counterfeiting, simulation of

signature while alteration is simulation or

counterfeiting the material particulars of the

instruments and these are the amount, date,

interest, currency, all these, material particulars

that changes the effect or terms of the

instrument. So forgery applies only to

signatures, alteration to material particulars of

the instrument. Remember the word: wholly

inoperative. So that if the signature is forged

like supposing Maria issued a PN, I promise to

pay X or order 1M pesos, Sgd Maria. If the

signature of Maria is forged but it appears that

her signature was signed but that is not her real

signature because somebody forged it. Since

this is payable to order X can transfer this

instrument by indorsment. Supposing may

3Sec 23: Forged signature, effect of. When a signature is forged

or made without the authority of the person whose signature it

purports to be, it is wholly inoperative, and no right to retain the

instrument, or to give a discharge therefore, or to enforce

payment thereof against any party thereto, can be acquired

through or under such signature, unless the party against whom it

is sought to enforce such right is precluded from setting up the

forgery or want of authority.

utang si X kay A. So X transferred it to A, A eto

na yung pambayad ko sa utang ko. Indorsed to

A, Sgd X. And A further negotiated it to B and

then to C. C now is the holder. Can C compel

or demand payment from Maria if C is a holder

in due course under Sec 52? Under Sec 524,who is a holder in due course? You have to

memorize this just like Sec 1 because in

answering problems. Well you will not be asked

who is a holder in due course. You will not be

asked that simple question. But along the line

you will be asked ano ba to holder in due course

ba ito? First, that it is complete and regular;

Second, that he took it in good faith and for

value, meaning there was a transaction and in

that transaction you offer something at ano ba

yung something nay un, you offered a NI as a

payment or consideration of that transaction so

it could either be for an account or a value, for

account maybe for payment of an existing

obligation, for value maybe may binili ka sa

kanya or for exchange of something. So there is

a consideration always. So you took it in good

faith or for value. But remember that all holders

are presumed to be holders in due course.

There is a presumption. Like a person,

presumed innocent until proven guilty. Ganon

din, all holders are presumed holders in due

course unless proven otherwise. So you must be

a holder of the instrument which is complete

and regular in its face, nung binigay sayokumpleto yan. It was signed, it was filled up, all

the material particulars are filled up, so it is

complete or regular on its face. That is not

overdue, tignan mo yung date di pa ba yan

overdue? But kung nakalagay dun Oct 15, 2011

ang date and you still accepted that instrument

despite the fact that it is overdue, you are a

holder not in due course but it does not mean

that you cannot collect. You can still demand a

payment for that instrument kaya lang it will

depend to that person if he will pay you or not.

4Sec 52: What constitutes a holder in due course. A holder indue course is a holder who was taken the instrument under the

following conditions:

(a) That it is complete and regular upon its face:(b) That he became the holder of it before it was overdue,

without notice that it has been previously dishonored,

if such was the fact;

(c) That he took it in good faith and for value;(d) That at the time it was negotiated to him, he had no

notice of any infirmity in the instrument or defect in

the title of the person negotiating it.


5/8



And he can always interpose that no I will not

pay you because you are a holder not in due

course. Something like that. Now, in the case of

a check, if you accepted a check that is overdue,

remember that a check has a life of 6 months

only. So, nakita mo yung date doon Jan 15,2011. And despite that you accepted it, overdue

na. Again you are a holder not in due course.

Can you demand payment of that instrument?

Of course not, because it is a stale check. But it

does not render your obligation null and void, it

will only render the instrument null and void.

May utang ka pa rin. It only discharges that

instrument because it is overdue. Try to deposit

it to a bank, it will be dishonored. Tatakan nila

ng stale check so di ka mabayaran but the

obligation on the transaction is still there, it will

not discharge your obligation to pay, valid

naman yung transaction. It only discharges that

particular instrument. Alright so that you are

not aware of any defect or infirmity of the

instrument. Eh kung sabihin ni C na hindi ko

naman alam na forged yung signature ni Maria

dahil inindorse lang sakin ni B yan eh

pinambayad nya ng utang sakin. Anong malay

ko na forged signature ni Maria. He who alleges

or if Maria alleges that No I will not pay you

because you are not a holder in due course.

You prove that he is really not a holder in due

course. Who proves it? Maria. If she can prove

it then Maria is not liable. But in the case offorgery. Forgery is a real defense. It is a real

defense on the person liable against everybody,

against the whole world. So whether holder in

due course ka or not, against the whole world.

So he is not liable to anybody. Why? Because it

lacks the very essential element of a valid

contract, which is consent. The fact that this is

forged, she did not meant to be bound by that

instrument. Whoever is the holder, she can

interpose that real defense against anybody.

Okay but supposing that this signature is

genuine (Marias signature) (Pay to XX or order1M pesos, Sgd Maria), X here is the original

payee but A may be the secretary of X ninakaw

nya yung instrument na yan kasi secretary sya

eh. At anong ginawa ni A, nilagay nya. Pay to A,

Sgd X. She forged the signature of X and so on.

Napunta kay B, napunta kay C. C is now the

holder-in-due course. Again C now proceed

against Maria. That signature being genuine,

can she now compel Maria to pay the

instrument? The original payee is XX and in

order to indorse the instrument to her (A) finorge

nya ung signature ni X. If payable to order,

indorsement is necessary. Naindorse ba talaga

kay A? Indorsement is necessary because it ispayable to order, therefore, A here have no right

to retain, enforce, give discharge to the

instrument even to the succeeding parties. So C

cannot enforce the instrument against Maria

because it was not properly indorsed. So he had

no right to retain, enforce or give discharge or

even to transfer the instrument. C cannot

enforce the instrument against Maria because

Maria is a party prior to the forgery. So Maria,

X, A, B, C ganito ang sequence nya. Signature

of X was forged. Okay so again, can C proceed

against X? No because my signature is forged so

that signature is wholly inoperative against

anybody. So this forged instrument cannot be

enforced against X including party prior to the

forgery. C cannot enforce the instrument

against Maria even if her signature is genuine

because of the CUT-OFF RULE, okay?

Take note of Sec 95. When is instrument

payable to bearer, okay? Would your answer be

the same in this scenario? Can C proceed

against Maria? No. In that case, C can enforce

the instrument against Maria. In case of

payable to bearer, the mode of transfer is only by

delivery, even if the signature of X was forged, it

is still a valid delivery. In this case, bearer,

halimbawa nilagay sabi ni X, Maria wag mo na

lang ilagay X or bearer nilagay na lang Pay to

Cash. Sinabi nya Maria may utang ka sakin di

ba? Pwede ba wag mo ng ilagay yung pangalan

ko, kasi wala akong account sa banko eh pwede

ba ilagay mo na lang Pay to Cash. So the same

thing, payable to bearer pa rin, because the

name of the payee does not purport to be the

5

Sec 9.

When payable to bearer.The instrument to payable to

bearer:

a. When it is expressed to be so payable; orb. When it is payable to a person named therein or

bearer; or

c. When it is payable to the order of a fictitious or non-existing person, and such fact was known to the

person making it so payable; or

d. When the name of the payee does not purport to bethe name of any person; or

e. When the only or last indorsement is an indorsementin blank.


6/8



name of the person. Eh nakalagay nya jan pay

to the order of Cash, or pay to the order of

Superhero (nonexistent person). Eh may

nakalagay na order so dapat indorsed. But san

mo hahanapin si superhero o si Cash na

pipirma na magindorse. So these persons arefictitious, they are not persons who can sign,

consider that as bearer instruments para there s

no problem in transferring that, di na

kelanganang pirmahan. Sa movies lang meron

yang mga tao. So they are inexistent so pwede

ba nilang pirmahan yan. And since these are

bearer instruments, indorsements are not

necessary. Inindorse man ni X kay A, forged na

yung signature dyan. Indorsement is not

necessary kasi bearer instrument yan. No need

to indorse. But in case of a check, di ba, theres

such thing as clearing. 3 days clearing or

theres such thing as a check being accepted.

Binayaran ka ng banko, sige accepted or you

must clear. Once cleared, these are accepted,

meaning there is presumption that the signature

of the drawer is genuine because once inaccept

ng drawee bank yan it warrants the signature of

the drawer kahit forged yan. Kahit naforged

yan babayaran nya yung holder. So who should

bear the loss? Can the bank now charged or

debit the account of its depositor? Of course

not. Oy bakit mo binawasan yung account ko

ng 1M forged signature ko dyan. Because by

acceptance the drawee warrants the signature ofthe drawer so he bears the loss. It cannot

charged the account of its depositors.

Kasalanan nya yan. Take note the relationship

between of the bank and depositors is that of

debtor-creditor relationships. So banks have

records of specimens of signatures of its client

so its in a better position to know if the

signature is genuine or not.

Okay but supposing, PNB is the drawee bank,

kasi walng account sa PNB dineposit nya sa

BDO. BDO is a collecting bank kasi dineposit ni

C sa BDO. Di nya madeposit sa PNB kasi walashang account so sa BDO nya dineposit. BDO is

a collecting bank, nangongolekta sya. Check

was issued by Maria. Kaya lang forged naman.

There was forgery. Indorsers are secondarily

liable. The collecting bank is an indorser. It

indorses that to the drawee bank for collection

and if you have seen a bounced check: all prior

indorsements guaranteed. Who guarantees

that? The collecting bank. It warrants all prior

indorsements. So even if the signature of X is

forged, because of that warranty, BDO bears the

loss. Not the drawee bank because the drawee

bank only warrants the signature of its clients.

The collecting bank as indorsers warrants allprior indorsements so this is a prior

indorsement, So forged pala signature ni X

dyan, because of its warranty, BDO bears the

loss. Those are the important features of

forgery.

Forgery is a real defense. Also in the case of Sec

156, when the instrument is incomplete and

undelivered. Bat nagkagnon, incomplete na sya

hindi pa nadeliver. Bakit incomplete? The

material particulars are not filled up and there is

no signature. Kaya incomplete and undelivered.

Okay so bakit may problema eh incomplete palaand undelivered because along the line,

somebody completed it and somebody delivered

it. Finillup and dinilever and you are now the

last holder of the instrument. Nakita mo ung

instrument kumpleto na. Signed, fully indorsed,

amount, signature. But you did not know as a

holder that the instrument is originally

incomplete and undelivered but its reached the

ends of the transferee or holder who claims to be

now a holder in due course. Nung binigay sakin

complete and regular in its faith, that it appears

to be in good faith or for value, that it is not

overdue, that I am not aware of any infirmity. Is

the maker liable? No. Because in his ends, it

was not delivered, it was incomplete, somebody

forged it, signed it for him. That is also a real

defense of the person primarily liable. Real in

the sense that whoever is the holder. The

principal primarily liable is not liable under

incomplete and undelivered instrument,

although completed in the end but in the

beginning it was not. So far as the maker is

concerned he did not sign it. By the way, even

in genuine signatures, when you were asked to

sign under duress or misrepresentation,halimbawa tinutukan ka ng baril, that signature

6Sec 15. Incomplete instrument not delivered. Where an

incomplete instrument has not been delivered, it will not, if

completed and negotiated without authority, be a valid contract

in the hands of any holder, as against any person whose signature

was placed thereon before delivery.


7/8


Transcribed by: JMQuibolen Page 7of 8

even if its signature, it is wholly inoperative

because you did not intend to be bound by the

instrument under Sec 23. What are the

exceptions? Estoppel, gross negligence,

halimbawa tinawagan ka ng banko, Sir Maam

meron kang pinirmahan ditto payable sa kapatidnyo? Sige na nga bayaran na kahit finorged

yung signature nya ng kapatid nya. Estopped na

sya. She can no longer invoke the defense of

forgery simply because of estoppel or in some

cases where there is gross negligence of the

drawer herself. Bakit gross negligence? Eh di

ba the bank usually sends you statements of

account, nakikita nyo don yung binawas sa

account, she did not make any action to call the

bank and ask the bank to cancel the charges

against her, it took one year until the auditor

discovered the forgery of her signatures. Sabin g

SC, gross negligence, she received statements of

account every month and yet she did not make

any actions, it was only after 1 year after sinabi

ng auditor sa kanya. She cannot claim the

defense of forgery. Although there is one

authority,di ba in corporations, the officers are

designated to sign certain instruments for

certain amounts, may isang officer ngayon

pinirmahan nya despite the fact that he was not

authorized or designated. Halimbawa si

Cojuangco, chairman ng San Miguel Corp

pumirma ng document ng indorsement di pala

sya authorized. The signature should not berecognized because he is not authorized. As an

exception later on recognized, the fact that he is

a chairman, under the Corporation Law, that is

the doctrine of apparent authority. It is

apparent being the chairman as an exception.

How about alteration? Is the rule the same

under Rule 1247? Alteration is the change,

simulation of material particulars like the

amount, date of payment, anything that is

material that may change the effect of the

instrument. Will the rule in forgery be the same

7Sec. 124.Alteration of instrument; effect of. - Where a

negotiable instrument is materially altered without the assent of

all parties liable thereon, it is avoided, except as against a party

who has himself made, authorized, or assented to the alteration

and subsequent indorsers.

But when an instrument has been materially altered and is in the

hands of a holder in due course not a party to the alteration, he

may enforce payment thereof according to its original tenor.

in the rule of alteration. Well the rules are

different but the effect is the same. In rule 124

it says that, when the instrument is materially

altered, the instrument is void insofar as those

parties who did not give their consent, or assent

to the alteration meaning, if you are party to theinstrument, you did not participate in the

alteration or you are not aware or you did not

give your consent to the alteration, naturally,

you are not liable. But if you gave your consent

or you are the one who altered it or participated

in the alteration, of course, you are liable. That

is the meaning of the rule of alteration.

However, if the holder is a holder in due course,

he can enforce the instrument according to the

original tenor of the instrument. If the

instrument is 1M pesos and the payee altered it

ginawa nyang 7M pesos and negotiated further,

syempre yung holder di na nya alam kung

sinong nagalter. The rule in case of HIDC, again

apply Sec 52, that holder is entitled to the

original tenor. What is the original tenor? 1M.

So entitled sya dun sa maker ng 1M pesos,

otherwise, not entitled to anything because that

instrument is void insofar as the parties who did

not give consent to the alteration. Ganun din sa

forgery di ba? In forgery, the person whose

signature is forged, that signature is wholly

inoperative. In alteration, the person who did

not give consent, did not participate, did not

know, the instrument is void against him, o diwholly inoperative din against him. The only

difference there is if the holder in due course,

original tenor. In forgery kahit na sino.

When the instrument is payable Nov 12, 2011.

You are the holder of the instrument, what will

you do? Presentment for payment. You present

the instrument to the person primarily liable.

What is the purpose of presentment for

payment? To charge persons secondarily liable

hindi primarily liable. Because yung primarily

liable, primarily liable sya eh so that you can

proceed to those secondarily liable you presentfor payment. If presentment for payment to

primarily liable is not honored, you proceed to

those secondarily liable. You do that for

purpose of charging persons secondarily liable.

Meaning if the instrument is matured and kung

kapitbahay mo si Henry Sy and he is one of the

indorsers. The party primarily liable is Juan

dela Cruz and you know very well that Juan dela


8/8



Cruz cannot pay you. Pumunta ka kay Henry

Sy na kapitbahay mo. It discharges all parties

secondarily liable. Your duty is to present first

to the person primarily liable, that is the

physical production of the instrument, in order

for him to examine. Ito be yung instrument, itoba yung pirma ko. Kung hindi naman you can

now exercise your recourse against those

secondarily liable.

Documents

Nego 1. Atty Gapuz