NEGOTIABLE INSTRUMENTS NOTES

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

Page 82 of 190

BY: MA. ANGELA LEONOR C. AGUINALDO

ATENEO LAW 2D BATCH 2010

Ten Sen Guan then was prompted to return the bill of lading and other documents and requested Asia Banking Corporation, the agent of Snow Ltd. to cancel its acceptance, which the corporation promised to do so. However it didn't do good its promise since it sued Ten Sen Guan for the amount of the draft. The trial court however ruled in favor of Ten Sen Guan. HELD: It is undisputed that the defendants placed the order with Snow Ltd. for 10 cases of mercerized bastite and that the draft was drawn from the corresponding value of 10 cases of mercerized bastite including incidental expenses. That when the cases were examined it was found out that it wasn't bastite but instead were burlap, of which the corporation was notified and that Ten Sen Guan refused to refused the goods. The corporation alleges that it is a holder for value but it failed to prove such allegation. If indeed it was a holder for value, it could have easily proven such fact by competent evidence but it failed to do so. It wasn't able to give an authentic account of the transactions. It being a fact that it is not a holder for value, it is susceptible to any defenses available to Ten Sen Guan. According to the findings, the acceptance was conditional. The draft was for collection and also, the evidence established that the corporation has released Ten Sen Guan from liability from the draft.

109 FOSSUM V. FERNANDEZ 44 PHIL 675

FACTS: Fernandez Hermanos placed an order with the products company for the manufacturing of a chain given a set of specifications. The chain was duly prepared and delivered. A draft was drawn by the company and was accepted by Fernandez Hermanos. Thereafter, the draft was negotiated with Fossum who demanded payment on the instrument but was refused by Fernandez on alleged failure of the chain delivered to satisfy the specifications given. HELD: It devolved around Fernandez Hermanos to allege and prove its claim that which was delivered and received didn't comply with the specifications and didn't answer the purposes for which it was intended. It alleged that the chain didn't meet the specifications given by the contract. Nonetheless, there was failure to identify the so-called defects of the chain. It was upon

Fernandez Hermanos to show that indeed the chain was defective. But as the trial court found out, there was a failure of proof.

**WEEK 9: MIDTER**WEEK 9: MIDTERMS WEEKMS WEEK

NOTES FOR WEEK 10NOTES FOR WEEK 10

AUGUST 20AUGUST 20--25, 200725, 2007 V. LIABILITIES OF PARTIES

Sec. 60. Liability of maker. - The maker of a negotiable instrument,

by making it, engages that he will pay it according to its tenor, and admits the existence of the payee and his then capacity to indorse.

MAKER PRIMARILY LIABLE • Engagement of the maker is to pay absolutely for the note according

to its tenor • His liability is primarily and unconditional • One who has signed an instrument as a maker is presumed to have

acted with care and to have signed the instrument with full knowledge of its contents, unless of course, if fraud is proved

MAKER MUST PAY ACCORDING TO THE TERMS OF THE NOTE • The maker bound himself to pay personally. He cannot shift the

obligation without the consent of the payee. He cannot allege that he spend the money on expenses which should be charged to a trust administered by a creditor because it is not the payee’s concern to know how the proceeds should be spent. That is the sole concern of the maker. The payee’s interest is merely to see that the note is paid according to its term.

LIABILITY OF 2 OR MORE MAKERS • When 2 or more makers sign jointly or severally, each of them is

individually liable for the payment of the full amount of their obligation even if one of them didn’t receive part of the value given therefor, as he would be considered as an accommodation party

PAYEE’S EXISTENCE, ETC. • The maker also admits of the existence of the payee and his then

capacity to indrose • He is precluded from setting up the following defenses:

o That the payee is a fictitious person because by making the note, he admits that the payee exists