NEGOTIABLE INSTRUMENTS NOTES

BASED ON AGBAYANI’S BOOK AND ATTY. MERCADO’S LECTURES

Page 162 of 190

BY: MA. ANGELA LEONOR C. AGUINALDO

ATENEO LAW 2D BATCH 2010

Paragraph 8 of the Trust Receipt which reads: "My/our liability for payment at maturity of any accepted draft, bill of exchange or indebtedness shall not be extinguished or modified" does not, contrary to the holding of the public respondent, contemplate prior acceptance by Philippine Rayon, but by the petitioner. Acceptance, however, was not even necessary in the first place because the drafts which were eventually issued were sight drafts And even if these were not sight drafts, thereby necessitating acceptance, it would be the petitioner and not Philippine Rayon which had to accept the same for the latter was not the drawee. Presentment for acceptance is defined an the production of a bill of exchange to a drawee for acceptance. THE TRIAL COURT AND THE PUBLIC RESPONDENT, THEREFORE, ERRED IN RULING THAT PRESENTMENT FOR ACCEPTANCE WAS AN INDISPENSABLE REQUISITE FOR PHILIPPINE RAYON'S LIABILITY ON THE DRAFTS TO ATTACH. Contrary to both courts' pronouncements, Philippine Rayon immediately became liable thereon upon petitioner's payment thereof. Such is the essence of the letter of credit issued by the petitioner. A different conclusion would violate the principle upon which commercial letters of credit are founded because in such a case, both the beneficiary and the issuer, Nissho Company Ltd. and the petitioner, respectively, would be placed at the mercy of Philippine Rayon even if the latter had already received the imported machinery and the petitioner had fully paid for it. 170 PHIL. BANK OF COMMERCE V. ARUEGO 102 SCRA 530

FACTS: Aruego, on behalf of World Current Events, entered into a Credit Agreement with PBCom, for the publication of the company’s periodicals. At every printing endeavor by the printing press, a bill of exchange is drawn against PBCom. The instruments are signed by Aruego, without any indication that he is an agent of World Current Events. When he was being held liable by PBCom, he averred that he only signed the instrument in the capacity of agent of the company. HELD: An inspection of the drafts accepted by the defendant would show nowhere that he has disclosed that he was signing in representation of the Philippine Education Foundation Company. He merely signed his name. For failure to disclose his principal, Aruego was personally liable for the drafts he accepted. Sec. 144. When failure to present releases drawer and indorser. -

Except as herein otherwise provided, the holder of a bill which is

required by the next preceding section to be presented for

acceptance must either present it for acceptance or negotiate it within a reasonable time. If he fails to do so, the drawer and all

indorsers are discharged.

PRESENTMENT FOR PAYMENT, DEFINED ! Production of a bill of exchange to the drawee for his acceptance GENERAL RULE AS TO PRESENTMENT FOR ACCEPTANCE ! Presentment for acceptance is not necessary for cases aside from the

three enumerated above ! In those three cases, to charge persons secondarily liable it is

necessary o To make presentment for acceptance o To negotiate the bill within a reasonable time

ILLUSTRATION

1. Where the bill is payable after sight. A bill is payable 30 days after sight. The law requires the bill to be presented for acceptance. The date of maturity will not be fixed if the bill isn’t presented.

2. Where there is express stipulation. The bill contains a stipulation that it must be presented for acceptance. Such a bill must be presented for acceptance.

3. Where bill is drawn elsewhere than at the residence of drawee. The bill reads as follows

a. The bill must be presented for acceptance in order to inform the drawee X of the existence of the bill so that he can make arrangements for its payment at the PNB Manila

Pay to B or order P1000 at the PNB, Manila.

Sgd. A

To X, Davao City

Sec. 145. Presentment; how made. - Presentment for acceptance

must be made by or on behalf of the holder at a reasonable hour, on a business day and before the bill is overdue, to the drawee or

some person authorized to accept or refuse acceptance on his behalf; and