Origen y desarrollo del derecho a la intimidad

FRAUD IN INDUCEMENT—relates to 1. Quality

2. Quantity

3. Value or character of consideration

Signer is led by deception to execute what he knows is a negotiable instrument. There is misrepresentation of facts touching inducement or desirability of contract. Fraud does not prevent contract.

There is fraud when other is induced to enter into a contract which, without them, he would not have agreed to. It is one of modes of acquiring a defective title from which HDC is free.

One knew that he was signing negotiable paper and therefore necessarily signed with knowledge that instrument would probably pass into hands of innocent purchaser but was deceived into signing for a larger amount than he intended or on different terms. He is consciously launching a negotiable instrument. Deceit is not in character of instrument but in its amount of its terms.

Fraud is one of negligence.

ACQUISITION OF INSTRUMENT BY FORCE, DURESS OR FEAR

DURESS—depriving one of his will and understanding by threats or unlawful means so that PN obtained from him is not free and voluntary act.

MISTAKE—substance of thing or conditions which have principally moved one or both parties to enter into the contract. This will vitiate consent only when such identity or qualifications have been the principal cause of contract. Simple mistake of account shall give rise to its correction.

INTOXICATION—when a man has voluntarily put himself in such a condition that a loss must fall on one of 2 innocent persons, it should fall on him who occasioned it.

Ultra vires acts of corporation in certain cases

Where corporation has power to issue negotiable paper but issuance was not authorized is not a defense against HDC

Want of authority of an agent in certain cases

Where agent is without authority, want of authority of agent is REAL DEFENSE; principal will not be bound. Where agent has apparent authority, although actually unauthorized, actual want of authority is equitable.

Other possible defenses 1. Blank signature

2. Bankruptcy or insolvency 3. Counterclaims and set-offs 4. Discharge

5. Lack of revenue stamp

Blank signature No intention to issue a negotiable instrument; where there is an intention to issue a negotiable instrument but blank signature is filled up contrary to authority or is not filled up within reasonable time, it is EQUITABLE.

Bankruptcy or insolvency

2 legal situations

1. Party primarily liable on instrument—where it is party liable who is bankrupt or insolvent, it is no defense A maker of note in hands of F holder

A declared insolvent

F may file claim with assignee or trustee in bankruptcy appointed by Court 2. One negotiating who is bankrupt or insolvent

Where negotiation is made within 30 days before filing of petition for insolvency, negotiation is VOID and no title is transferred. Bankruptcy is REAL DEFENSE.

Where party who is insolvent or bankrupt is one negotiating, it may or may not be a defense depending upon time of indorsement.

Q: A maker of note payable to order of B, B negotiates it to C, C to D. D becomes insolvent. Within 30 days before filing of petition declaring him insolvent, D negotiates note to E. Can E collect from A?

A: NO. A can interpose defense that negotiate made by D is void and therefore, E has no right or title to note or its proceeds. A’s liability is not extinguished. While he is not liable to E, he is liable to assignee in insolvency of D insolvent. Where however note is negotiate by D to E before 30 day period, negotiation is valid and title to note passes to E. A is liable to E and A cannot interpose defense of bankruptcy or insolvency of D

Counterclaims and

set-offs SEC 58, DEFENSE from which holder is NOT HDC is not free—means technical defenses as distinguished from set-offs.

SET-OFF—not generally as a defense; between original parties whom there is a privity, a set-off may be pleaded to a negotiable instrument the same as it may be to a non-negotiable instrument.

A makes note for P1,000 payable to order of B A owes B P1,000

B owes A P600

In case of action by B against A for P1000 A can set-off sum of P600 which B owes him He would then be liable for P400 only

COUNTERCLAIMS AS AGAINST REMOTE PARTY; HDC

But as between remote parties NOT HDC, GR: although there is considerable conflict of authorities, in an action by an indorsee, independent demands against payee cannot be set-off, but only such equities which arise out of instrument itself.

B negotiates note to C

In an action by C against A, A cannot set-off the P600 which B owes A, against claim of C, even if C is not HDC Set-off or counterclaim is not available against HDC

Discharge Before NIL, discharge was treated as defense but it is deemed best to submit to new classification as adopted in law. If instrument is discharged, anyone who has been a party to it may set up against holder a defense that it has been extinguished as an existing contract and that holder or payee holds it as a mere receipt or voucher.

DISCHARGE AS DEFENSE BETWEEN ORIGINAL PARTIES—good defense between original parties or between parties having only their rights = remote parties NOT HDC. Payment in due course at or after date of maturity is a defense against any holder, as any holder who acquires the instrument after maturity is NOT HDC.

DISCHARGE AS DEFENSE AGAINST HDC—but against HDC, where party paying instrument does not observe precautions, it is not a defense.

A makes a note payable on demand to B or order B negotiates note to C

C collects from A but A does not get back the note C negotiates note to D, HDC

D can still collect from A who cannot interpose defense of discharge Lack of revenue

stamps NIRC requires placing of documentary stamps on each bank check, draft or certificate of deposit not drawing interest, or order for payment of any sum of money drawn upon or issued by any bank, trust company, or any person or persons, companies or corporations, at sight or on demand, in all BE, drafts, certifications of deposit drawing interest or orders for payment of any sum of money otherwise than at sight or on demand, or on all negotiable PN except bank notes and on each renewal; upon acceptance of payment purporting to be drawn in a foreign country but payable in the Philippines, and on all foreign BE and LOC including orders, by telegraph or otherwise, for payment issued by express or steamship companies or by any person or persons drawn in but payable out of the Philippines in a set of 3 or more according to custom of merchants and bankers.

EFFECT OF FAILURE TO STAMP

SEC 233, National Internal Revenue Code—instrument required to be stamped and which has been signed, issued, accepted or transferred, without being duly stamped, shall not be recorded nor shall be admitted or used in evidence in any court until requisite stamp shall have been affixed and cancelled.

No notary public or other officer shall add his jurat or acknowledgement to any document subject to documentary stamp tax unless proper documentary stamps are affixed and cancelled.

Effect is to make instrument unenforceable. But this defect may be cured by affixing stamp at time instrument is presented in evidence.

 Give the effects of each of the following: a) Incomplete but delivered instrument; b) Complete but undelivered instrument; and c) Incomplete undelivered instrument

Incomplete but delivered instrument Complete but undelivered instrument Incomplete undelivered instrument

Where the instrument is wanting in any material particular, the person in possession is prima facie presumed authorized to complete it.

A signature on a blank paper delivered by the person making the signature in order that it may be converted into a negotiable instrument operates as prima facie authority to fill it up as such for any amount.

In both cases, however, the instrument must be filled up strictly in accordance with authority given and within reasonable time in order that it may be enforced against any person who became a party prior to its completion. However, persons negotiating after its completion are liable because of their warranties.

Delivery is essential to the validity of the negotiable instrument. As between immediate parties and those who are similarly situated, delivery must be coupled with intention of transferring title to the instrument.

However, if the instrument is in the hands of a HDC, valid delivery to him is conclusively presumed.

HDC may enforce the instrument as if it had been filled up strictly in accordance with authority given and within reasonable time. Hence, it is no defense in an action to enforce PN that it was signed in blank as SEC 14 concedes prima facie authority of person in possession to fill in the blanks.

The defense of lack of delivery of a complete

instrument is only a personal defense. Non-delivery of an incomplete instrument is a real defense.

Problems

1. Jose Reyes signed a blank check and in his haste to attend a party, left the check at the top of his executive desk in his office. Later, Nazareno forced open the door to Reyes’ office and stole the blank check. Nazareno immediately filled in the amount of 50,000 and a fictitious name as payee on the said check. Nazareno then endorsed the check in the payee’s name and passed it to Roldan. Thereafter, Roldan endorsed it to Dantes.

a. Can Dantes enforce the check against Jose Reyes?

b. If Dantes is a HDC, will your answer in (a) be the same?

A: Dantes cannot enforce the instrument against Jose Reyes. Jose Reyes can raise the defense that the incomplete instrument was not delivered since the check was only stolen and filled up by Nazareno.

My answer would still be the same even if Dantes is HDC. If an incomplete instrument has not been delivered, it will not, if complete and negotiated without authority, be a valid contract against any holder, even HDC.

2. A signed a blank check and kept it inside the drawer of his desk in his office. B, a janitor opened the drawer, got the check and filled in the amount 100,000 with B’s name as payee. Thereafter, B indorsed the check to C and C indorsed the check to D. Should the drawee bank dishonor the check?

Can D hold A liable? Would your answer be the same if D was HDC? How about B and C, are they liable to D?

A: NO, D cannot hold A liable because the instrument is incomplete and undelivered. An incomplete and undelivered instrument would not be a valid instrument in the hands of any holder as against an person whose signature was placed before delivery.

YES, my answer will be the same even if D is a HDC because SEC 15 says “any holder”.

YES, BC are liable. B because he was the forger and besides an indorser, and he warrants that the instrument is genuine and in all respects what it purports to be. SO also with C.

 Give the different forms of fraud

Fraud in execution Fraud in inducement Fraud in factum

When a person induced to sign an instrument not knowing the character as a note or bill. The person who signed the instrument does not know that he is signing a negotiable instrument.

Person signs the instrument intends to sign it as a negotiable instrument but was induced only by fraud. His consent to issue was vitiated by fraud.

The person who signs the instrument lacks knowledge of the character or essential terms of the instrument. But the defense is not available if the party involved has reasonable opportunity to obtain such knowledge.

EX: A blind person was made to sign a piece of paper he believed to be a credit application although it is really a PN.

It is a personal defense It is a real defense

Problem

 A induced B by fraud to make a PN payable on demand to the order of A in the sum of 5,000,000. Can A file an action successfully against maker B for the amount of the note? If A transfers the note to C who pays 5,000,000 therefore and acquires the note under circumstances to make C HDC. Can C file an action successfully against B, maker of the note for the amount?

A: NO, B may raise the defense of fraud of inducement against A who is not HDC. This is true in a case where A was the one who fraudulently induced B to issue the note.

YES, C can file an action successfully against B. C is presumed to be HDC. Hence, in the absence of proof that he is not, he is HDC who is free from personal defenses including fraud in inducement.

 What is the difference between failure or absence of consideration and illicit consideration?

Failure or absence of consideration Illicit consideration

Personal defenses Personal defense

EXCEPTION: if the statute declares the instrument void for any purpose.

Problem

1. AB issued 2 postdated checks to CV, as security for pieces of jewelry to be sold. Each check has a face value of 50,000. Thereafter, CV negotiated the check to SIH Inc. without knowledge of AB. AB returned the jewelries to CV and tried to retrieve the checks. Having failed to do so, AB withdrew her funds from the drawee bank and the checks were dishonored when presented for payment. SIH sued AB who interposed the defense that the checks did not have any consideration. However, AB did not present proof that SIH is not HDC. Will defense of absence of consideration prosper?

A: AB cannot invoke the defense of absence of consideration against SIH. There is no showing that SIH is not HDC, hence presumption stands. As HDC, SIH is free from personal defenses of prior parties.

2. A bill of exchange was issued because of the love and affection of drawer for payee. Can the drawer be held secondarily liable (assuming non-acceptance by the drawee on the instrument): a) by the payee; b) by a HDC?

A: NO, drawer cannot be held secondarily liable by payee because while the love and affection may be a good consideration, it is not a valuable consideration. Lack or absence of consideration is a vlaid defense between drawer and payee.

3. Pedro issued a negotiable note to Juan, a government employee to facilitate the early release of the government approval of application that he filed.

Juan negotiated the instrument to Pablo, a HDC. When Pablo presented the instrument Pedro for payment, Pedro claims that he is not liable because the consideration was illicit. Is the refusal of Pedro justified?

A: Refusal is not justified. Illegality of consideration is only a personal defense. Since Pablo is HDC, illegality of consideration cannot be invoked.