Sec 39Conditio nal indorsement

Party to pay has to pay to indorsee regardless condition is fulfilled or not

To whom IT is indorsed will hold the same or proceeds subject to rightof person
indorsing conditionally

Absolute indorsement- indorser binds himself to pay upon no other condition than failure of
prior parties to do so and of due notice of failure
Conditional indorsement condition on indorsers liability or indorsees right to collect
proceeds
- No prohibition on further nego regardless fulfilled or not
- Condition on indorsement still nego, condition on face = non nego

EX.
A may utang kay B.
B indorsed it to C. Pay toC if ikinasal

Condition binding in favor of indorser and subsequent holders thru C onwards

If di pumasa within maturity date of instru, debto Ar may refuse to pay C.
Without condition fulfilled, A may disregard condition and pay C. A has right to terminate
obligation on maturity date cannot be burdened by conditions not part of contract
- C holds proceeds in trust for B and does not become owner until condition is fulfilled
- Not complied parin condition turn over proceeds to indorser B.

Diff comb indorsements lahat may (sgd.) A sa dulo or sgd P if may A

1. Special and restrictive pay to A only
2. Special and qualified pay to a without recourse
3. Special and condition pay to a if he marries bef 25yrsold
4. Blank and restrictive for collection only
5. Blank and qualified without recourse
6. Blank and conditional payable upon completion of house in pateros
7. Special unrestrive unqualified pay to B

Sec 40 indorsement of instru payable to bearer

Instrument payable to bearer is INDORSED SPECIALLY, it may nevertheless be
further negotiated by delivery,
Person indrsng specialy is LIABLE as indorser only holders as make title thru his
indorsement

Payable to bearer is NOT converted into order indorsed specially

Indorsee may further negotiate by delivery
Indorsing speciall LIABLE to HOLDERS who can trace title to instrument by a series of
unbroken indorsement from such special indorserts
Liability = general indorser

EX.
A-B-C-D.-E
A issues PN to B or bearer and delivers it to B.
To negotiate to C, B has to deliver it to C.
With or without indorsement of B, C becomes holder by its delivery. INDORSEMENT NOT
NECESSARY.

If B indorses it to C, C may negotiate it by delivery to D.

D has no right against B since he did not obtain his title thru endorsement pf B.
But C and A (indorser maker) is liable to D.

Pay to C. signed B
Pay to D. signed C

*B is liable as general endorser to C and D,

*C is liable to D
*E obtains title by nego by delivery of instrument by D and not thru indorsements of B and
C. B and C not liable to E. D is liable to E.

APPLICATION:
- Instruments payable to bearer
- NOT ALLOWED to originally made payable to order and inroded in blank bc not
payable to order becomes payable to bearer only when LAST indorsemnt is BLANK
- Blank inforsement followed by special indorsement not sec 9
- Isang indorsement lang, pag inindorse pa ulit, di na payableto bearer bc
special indorsment na

Sec 41
Indorsement where payable to 2 or more pips
2 or more payees or indorsees who are NOT PARTNERS, all must indorse unless
the one indorsing has authority to indorse for others

1. Refers to joint indorsement 2 or more payees jointly P&A

2. 2 or more payees severally pay to order of P or A bc pwede inegotiate pa ng
either payee regardless of share in instru
3. Indorsement by all payees or indorsees order of 2 or more payees or indorsees,
ALL MUST INDORSE para manegotiate.
a. If iisa lang nagendorse, indorsee has no right of action contrary sec 32

When joint indorsement by all payees not required

1. Payee/indorsees are partners
2. Payee or indorsee has authority to indorse for others

If inendorse without authority or not partners DOES NOT CONSTITUTE NEGOTIATIONbc ITS
NOT ENDORSEMENT OF ENTIRE INSTRU

Like partnership=
If partners = inforsed under firm name not joint payees
Partner Indorser should have authority expressed or implied

Sec. 42. Effect of instrument drawn or indorsed to a person as cashier.

Instrument drawn or indorsed to a person as"cashier" or other fiscal officer
bank/corporation, = PRIMAFACIE to be payable to the bank or corporation of
which he is such officer
May be negotiated by either the indorsement of the bank or corporation or the
indorsement of the officer.
QUESTION: does it limit to fiscal officer? What if pres?whats the assumption
(depending sa by law)
* fiscal officer: finance or financial matters, such as money, taxes, or public or private revenues.
*primafacie may be disproved by sufficient evidence contrary

Sec. 43. Indorsement where name is misspelled, and so forth.

name of a payee or indorsee is wrongly designated or misspelled,
he may indorse the instrument as therein described adding, if he thinks fit, his proper
signature.

such that:
1. Sgned Keisha avestro sgned krisha avestro

*holder paying or giving value for instru may require payee or indorsee sign in both names

Sec. 44. Indorsement in representative capacity. - Where any person is under obligation to
indorse in a representative capacity, he may indorse in such terms as to negative
personal liability (???).
*sec 20

Sec. 45. Time of indorsement; presumption. - Except where an indorsement bears date after
the maturity of the instrument, every negotiation is deemed prima facie to have been
effected before the instrument was overdue.

Holder in due course = taken instrument bef overdue sec 52

Instru Bears a date = assumption = true date sec 11
Without date bef maturity assumption
Indorsement After maturity- burden of proof allegor
Sec. 46. Place of indorsement; presumption. - Except where the contrary appears, every
indorsement is presumed prima facie to have been made at the place where the
instrument is dated.

If without place of indorsement presumption made where note is dated

Otherwise: allegor burden of proof

Sec. 47. Continuation of negotiable character. - An instrument negotiable in its origin

continues to be negotiable until it has been restrictively indorsed or discharged by
payment or otherwise.

Gr: instru negotiable in origin = always nego

*even if overdue nego instru, but not anymore holder in due course (sec52)
EXCPTN:
a. Restrictly indorsed
- Not every restrictive indorsement prohibits further nego (sec36)
- But here PROHIBITS FURTHER NEGO
b. Discharged by payment or otherwise
- OTHERWISWE= other way sec 119 (READ)

Sec. 48. Striking out indorsement.

The holder may at any time strike out any indorsement which is not necessary to his
title.
The indorser whose indorsement is struck out, and all indorsers subsequent to him,
are thereby relieved from liability on the instrument.

When a holder may strike out indorsement

1. Payable to bearer on face nego by delivery even without indorsement
- In case of it is indorsed its still bearer instrument and still further indorse by delivery
sec 40
- Holder may strike out all intervening inforsement or unnecessary to title
- Originally bearer instru, still bearer regardless of special indorsements
2. Instrument originally payable to otderSEC8
- Negotiated only by indorsement of payee by delivery
- Special indorsement the indorsement of special indorsee is necessary to further
negotiate instru
- Blank instru = payable to bearer and nego by delivery
- SEC9 payabele to order becomes bearer when ONLY or LAST instru is BLANK. So when
blank indorsment is followed by special indorsement and holder strikes out all
indorsement subsequent to blank, instrument will become payable to BEARER as last
indorsement is blank.
 - Special indorsment arent necessary to holders title without subsequent indorsement
he could have acquired title by delivery
- Indorser whose indorsement is cancelled and all indorsers subsequent are relieved
from liability on instru 120, 4

- Indorser ma not strike out payees indorsement = payable to order cant be validly
negotiated without his indorsement
-
- DI KO NAGETS HONESTLY
-
Sec. 49. Transfer without indorsement; effect of. - Where the holder of an instrument
payable to his order transfers it for value without indorsing it, the transfer vests in
the transferee such title as the transferor had therein, and the transferee acquires in
addition, the right to have the indorsement of the transferor. But for the purpose of
determining whether the transferee is a holder in due course, the negotiation takes
effect as of the time when the indorsement is actually made.
-
- ONLY TO INSTRUMENTS PAYABLE TO ORDER
- DELIVERY WITHOUT INDORSEMENT = not negotiation
- EFFECT:
o Operates as equitable assignment, transferee acquires instrument subject to
defenses and equities available to prior parties
o Kenat negotiate
o Transferor had legal title, transferee acquires title and the right to have
indorsement of transferor
Transferee qualifies as HOLDER upon receiving indorsement and is
capable of further nego
Bef indorsement is made, transferee is not a holder. Negotiation
takes effect as of the time the indorsement is actually made for
purpose of determining transferee is a holder in due course
*bef actual indorsement
- transferee not a holder nor bearer
Transferee is asigneewho holds instru subj to equity

Effect of indorsemenr after transfer

- Assignee may require indorser to indorse instru UNLESS there is proof of contrary
- Indorsemenr of indorser becomes negotiation and holder
- Time of holder in due course- actual indorsement bc negotiation is completed at
indorsement not delivery

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-
-
 -
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Sec. 50. When prior party may negotiate instrument.
- Where an instrument is negotiated back to a prior party, such party may, subject to
the provisions of this Act, reissue and further negotiable the same.
- But he is not entitled to enforce payment thereof against any intervening
party to whom he was personally liable.

Reacquirer- further negotiates then reacquire

Bef maturity- he may negotiate the same further.
After paying holder, he may not claim payment from intervening parties. Avoid multiplicity of
suits

(READ EXAMPLE) !!!!

Limits of renege:
1. Payable to order of 3person and has been paid by drawer
2. Made or accepted by accomodoation and has been by part accommodated
3. Discharged when acquired by prior party

IV. RIGHTS OF THE HOLDER

Sec. 51. Right of holder to sue; payment. - The holder of a negotiable instrument may to sue
thereon in his own name; and payment to him in due course discharges the instrument.

Classes of holders: (assignee or transferee)

Holder of bearer and payee indorsee of order instru
Holder means payee or indorsee of a bill or note in possession, or bearer
1. In the hands of any holder(other than due course) nego instrument subject to any
defense or defect in the instrument, whether real or personal as if it were non
negotiable. But does not equate non nego agad
- Holder itself is not holder in due course but derive his title from holder in due course,
is given rights of such prior holder
2. Holder of nego = not necessarily theowner
- Thief is holder, and can legally transfer or negotiate but not OWNER

CLASSES OF HOLDERS (ascending)

bearer
a. holders simply 51
b. holders for value 26
c. holders in due course 52 57

Rights of holder in general

 1. sue in his own name
2. receive payment and if payment in due course = instru discharged
- holder for collection only may sue in his own name
- pledge of a note may sue as if holder
Right of transferee of unendorsed instrument to sue:

Transferee of unindorsed instrument is = not a holder

He may do so.. sec 49 transfer ests in the transferee such title as the transferor had
transferor had legal title = this must pass by transfer subject to defenses

Sec. 52. What constitutes a holder in due course. - A holder in due course is a holder
who has taken the instrument under the following
conditions:chanroblesvirtuallawlibrary
(a) That it is complete and regular upon its face;

(b) That he became the holder of it before it was overdue, and 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.

Sec. 53. When person not deemed holder in due course.

Where an instrument payable on demand is negotiated on an unreasonable length of
time after its issue, the holder is not a holder in due course.
* holder in due course = bef overdue
-applies instrument payable at fixed/determinable future time
- payable on demand sec 53 governs whther purchase is an over due instru
-reasonable time- regard is to be had to the nature of the instrument, the usage of trade or
business if any with respect to such instruments and facts of particular case

Sec. 54. Notice before full amount is paid. - Where the transferee receives notice of any
infirmity in the instrument or defect in the title of the person negotiating the same
before he has paid the full amount agreed to be paid therefor, he will be deemed a holder
in due course only to the extent of the amount therefore paid by him.

*infirmity imperfection that renders a particular transaction void or incomplete

Effect of notice bef full payment

1. no amount has yet been paid

- instrument has been taken but purchaser has not yet paid anything and he
receive notice of infirmity or defect= relieved from obligation to make
payment
- he does so, quote clear that he is entitled to same protection as a holder in
due course
2. amount has been paid
- instrument transferred to him in consideration of his promise to make future
payments to his transferor, no legal oligation to pay balance of the amount
he has agreed to pay on discovering infirmity or defect.
- If he does so he can be considered a holder in due course, only to amount
paid
- Holder in due course sa bayad before knowing defective title, but as as
balance

Sec. 55. When title defective. - The title of a person who negotiates an instrument is
defective within the meaning of this Act when he obtained the instrument, or any
signature thereto, by fraud, duress, or force and fear, or other unlawful means, or for an
illegal consideration, or when he negotiates it in breach of faith, or under such
circumstances as amount to a fraud.

Title of Person who negotiates an instru is defective under 2 ways:

a. In the acquisition
- Obtained instru or any signature there to by fraud , duress, force and fear by
unlawful means or illeha; consideration
b. In the negotiation
- Negotiated in Breach of faith or under such circumstances as amount to a
fraud.
- Duress or force and fear include all acts which overcome the signers will

READ EXAMPLES PAGE 152

1. Fraud
2. Duress or force and fear
3. Unlawful means
4. Illegal consideration
5. Negotiation in breach of fait
6. Circumstances amounting to fraud
Sec. 56. What constitutes notice of defect. - To constitutes notice of an infirmity in the
instrument or defect in the title of the person negotiating the same, the person to whom it is
negotiated must have had actual knowledge of the infirmity or defect, or knowledge of such
facts that his action in taking the instrument amounted to bad faith.

Notice of defect
-transferee mustve actual knowledge of the infirmity or defect or knowledge of such facts(wc
dont appear on face on instru) that his action in taking the instru amounts to bad faith.
- actual knowledge is shown by the instrument

1. Mere negligence to make inquiries not sufficient

- Because it doesnt equate to actual knowledge or bad faith
- Bad faith/good faith = question of fact
- Mere suspiscious circumstances arent enuf
- Consulting an attorney bef taking a note doesnt show bad faith
- Indorsement without recorse constitute badge of guilty knowledge

2. Knowledge amounting to bad faith

3. Effect of notice of defect

Sec. 57. Rights of holder in due course. - A holder in due course holds the instrument free
from any defect of title of prior parties, and free from defenses available to prior parties
among themselves, and may enforce payment of the instrument for the full amount thereof
against all parties liable thereon. robles virtual law library

Sec. 58. When subject to original defense. - In the hands of any holder other than a holder in
due course, a negotiable instrument is subject to the same defenses as if it were non-
negotiable. But a holder who derives his title through a holder in due course, and who is not
himself a party to any fraud or illegality affecting the instrument, has all the rights of such
former holder in respect of all parties prior to the latter.
Sec. 59. Who is deemed holder in due course. - Every holder is deemed prima facie to be a
holder in due course; but when it is shown that the title of any person who has negotiated
the instrument was defective, the burden is on the holder to prove that he or some person
under whom he claims acquired the title as holder in due course. But the last-mentioned rule
does not apply in favor of a party who became bound on the instrument prior to the
acquisition of such defective title.
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.