Scribd
Upload
122 views2 pages

Bar Examination 2008

Here are brief responses to the issues raised: (a) Yes, the check can be considered a negotiable instrument despite the illegal consideration for which it was issued. Under the Negotiable Instruments Law, illegality of consideration does not affect the character of the instrument or the capacity of the holder. (b) No, S does not have a cause of action against R in case of dishonor. Being that the consideration for the check was for an illegal act, the courts will not enforce or assist in the enforcement of any right directly springing from such an illegal transaction. (c) Yes, if S negotiated the check to T, a holder in due course, R may be held secondarily liable by T

Uploaded by

Alyce Ajtha
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOC, PDF, TXT or read online on Scribd
122 views2 pages

Bar Examination 2008

Here are brief responses to the issues raised: (a) Yes, the check can be considered a negotiable instrument despite the illegal consideration for which it was issued. Under the Negotiable Instruments Law, illegality of consideration does not affect the character of the instrument or the capacity of the holder. (b) No, S does not have a cause of action against R in case of dishonor. Being that the consideration for the check was for an illegal act, the courts will not enforce or assist in the enforcement of any right directly springing from such an illegal transaction. (c) Yes, if S negotiated the check to T, a holder in due course, R may be held secondarily liable by T

Uploaded by

Alyce Ajtha
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOC, PDF, TXT or read online on Scribd
You are on page 1/ 2

BAR EXAMINATION 2008

MERCANTILE LAW

AB Corporation drew a check for payment to XY Bank. The check was given to an officer of AB Corporation who was instructed to deliver it to XY Bank. Instead,
the officer, intending to defraud the Corporation, filled up the check by making himself as the payee and delivered it to XY Bank for deposit to his personal account.
AB Corporation come to know of the officer's fraudulent act after he absconded. AB Corporation asked XY Bank to recredits its amount. XY Bank refused.

a. If you were the judge, what issues would you consider relevant to resolve the case? Explain (3%)
b. How would you decide the case? Explain. (2%)

SUGGESTED ANSWER:

1. If I were the judge, I would consider the following issues as relevant to the case: 

o Whether or not AB Corporation is negligent


o If so, whether or not such negligence is the proximate cause
o Whether or not there is contributory negligence on the part of XY Bank
2. AB Corporation must bear the loss. 

The Negotiable Instruments Law provides that where an instrument is wanting in any material particular,the person in possession thereof has prima facie
authority to complete it by filling up the blanks therein. This rule is founded upon the principle that where one of two persons must suffer by the bad faith
of another, the loss must fall upon the one who first reposed confidence and made it possible for the loss to occur. 

Applying said principle to the case at bar, although AB Corporation cannot necessarily be faulted for placing confidence on its own officer, the fact
remains that such act is the proximate cause of the loss. Moreover, there is no showing that XY Bank is likewise negligent. By the very nature of negotiable
instruments, one is not obligated to inquire beyond what appears on its face. 

Hence, as between the drawer AB Corporation and drawee XY Bank, the former bears the loss.

II

Pancho drew a check to Bong and Gerard jointly. Bong indorsed the check and also forged Gerard's endorsement. The payor bank paid the check and charged
Pancho's account for the amount of the check. Gerard received nothing from the payment.

a. Pancho asked the payor bank to recredit his account. Should the bank comply? Explain fully. (3%)
b. Based on the facts, was Pancho as drawerdischarged on the instrument? Why?(2%)

SUGGESTED ANSWER: 

c. 1. Yes, the payor bank should comply.

Basic is the rule that if the payee's indorsement is forged, the drawee bank cannot debit the drawer's account and the drawee
bank shall bear the loss.

In the case at bar, it was the indorsement of Gerard, one of the joint payees, which was forged. In the first place, the payor bank
had no right to pay the check due to such forgery. In the second place, the fiduciary nature of their relationship requires the bank
to treat the accounts of its depositors with meticulous care. By paying the check where the payee's signature is forged, the bank is
obviously wanting in that degree of care required by the nature of its functions.

Hence, the payor bank is obliged to recredit Pancho's account.

2. Yes, Pancho was discharged.

Under the Negotiable Instruments Law, a person secondarily liable may be discharged by any act which discharges the
instrument. One of the acts that discharges the instrument is payment made in due course by or in behalf of the principal debtor.
The same law provides that payment in due course is one made at or after maturity to the holder in good faith and without notice
that title is defective.

The facts of the case reveal that payment by payor bank to Bong is one made in due course, it being made at or after maturity to
the holder (Bong) in good faith and without notice that his title is defective.

Such being the case, the negotiable instrument is discharged, which in turn discharges Pancho, as drawer, from his secondary
liability.
BAR EXAMINATION 2007
MERCANTILE LAW

I.
(10%)

R issued a check for P1M which he used to pay S for killing his political enemy.

a. Can the check be considered a negotiable instrument?


b. Does S. have a cause of action against R in case of dishonor by the drawee bank?

c. If S negotiated the check to T, who accepted it in good faith and for value, may R be held secondarily liable by T?

Reason briefly in (a), (b) and (c).

You might also like