Protección contra el desgaste tubería – varillas

FACTS:

Great Asian Sales was a business engaged in the selling and buying of merchandise. In 2 of its board resolutions, it first authorized Arsenio, its treasurer, to secure a loan from Bancasia as well as to sign any pertinent documents related to such. Second, it authorized Arsenio to obtain from Bancasia a discounting line. Pursuant to these, deeds of assignments were issued by Great Asian in favor of Bancasia for receivables—specifically checks. Almost all the checks assigned by Great Asian were dishonored. Notice of dishonor was sent by the bank and its lawyer to Tan Chong Lin. Later, Great Asian filed for insolvency and in its petition, Bancasia was one of those listed as its creditors. In the meanwhile, a complaint was filed against Great Asian and Tan Chong Lin because of the surety agreement it signed in favor of Bancasia.

HELD:

First, under the 2 board resolutions, indeed Arsenio was authorized to obtain a loan and sign any document related to the securing of the loan. The question is whether the deeds of assignment signed by Arsenio was within the ambits of his authority.

The deeds of assignment enabled Great Asian to generate instant cash, with checks which were not due and demandable then.

In the financing industry, a discounting line means a credit facility with a financing bank or company, which allows a business entity to sell, on a continuing basis, its accounts receivable at a discount. The term discount means the sale of a receivable at less than its face value. The purpose of discounting line is to enable a business entity to generate instate cash out of its receivables which are still to mature at future debts. The financing company or bank which buys the receivables makes its profits out of the difference between the face value of the receivable and the discounted price.

Clearly, the discounting arrangements entered into by Arsenio were the same arrangements authorized under the board resolutions.

Second, on the issue of breach of contract, Bancasia alleged that Great Asian committed a breach. In the deeds of assignment, it was stipulated that there is a vital suspensive condition—in case the drawers fail to pay the checks on maturity, Great Asian obligated itself to pay Bancasia the full face value of the dishonored checks, including penalties and other costs. Failure to pay would give rise to the obligation to pay Bancasia.

Great Asian and Bancasia agreed on this specific with recourse stipulation, despite that the receivables were negotiable instruments. The contracting parties are allowed such stipulation in addition to the warranties of an indorser under the NIL. The explicit with recourse stipulation against Great Asian enlarges the liability of Great Asian beyond that of a mere indorser of a negotiable instrument. Thus, whether or not Bancasia gives notice of dishonor to Great Asian, the latter remains liable because of the with recourse stipulation.

The recourse of Bancasia to file an action for breach of contract doesn’t leave Great Asian with an empty bag. It is then subrogated back as creditor of the receivables. Great Asian can now proceed against the drawers who issued the checks. Even if there was no timely notice of dishonor, Great Asian is not prejudiced. A notice of dishonor is not required if the drawer has no right to expect or require the bank to honor the check, or if the drawer has countermanded payment.

Sec. 115. When notice need not be given to indorser. — Notice of dishonor is not required to be given to an indorser in either of the following cases:

(a) When the drawee is a fictitious person or person not having capacity to contract, and the indorser was aware of that fact at the time he indorsed the instrument;

(b) Where the indorser is the person to whom the instrument is presented for payment;

(c) Where the instrument was made or accepted for his accommodation.

WHEN NOTICE RELATIVELY EXCUSED

1. Where he has knowledge of the dishonor by means other than through a formal notice, as when he is both the drawee and drawer or when presentment is made to him

2. Where he has no reason to expect that the instrument will be honored, as when he has countermanded payment or where the drawee is fictitious or without capacity to contract

NO RIGHT TO EXPECT OR REQUIRE PAYMENT AS TO DRAWER

1. Where the drawer of the check has no account with the drawee bank

2. When the drawer of a check payable abroad has no funds with the drawee bank to meet it

3. When the knowledge that previous drafts on the same consignee had been dishonored.

• In the foregoing, the drawer has no right to receive notice of dishonor DRAWER HAS COUNTERMANDED PAYMENT

• A drawer tells drawee B not to pay the bill. F holder need not give notice to A drawer. An allegation that payment of a check had been countermanded is sufficiently set out where the check was set forth with the indorsement across the face “Payment stopped”

DRAWEE FICTITIOUS, ETC. MUST BE MADE KNOWN AS TO INDORSERS • The indorser must be aware of the fact that the drawee is fictitious or

not having capacity to contract. Otherwise, notice of dishonor must be given to such indorser to charge him. But the fact that that the indorser knew the maker to be insolvent or that the instrument was dishonored doesn’t dispense with the necessity of notice

Sec. 116. Notice of non-payment where acceptance refused. - Where due notice of dishonor by non-acceptance has been given, notice of a subsequent dishonor by non-payment is not necessary unless in the meantime the instrument has been accepted.

ILLUSTRATION

• F the holder presents it for acceptance to X drawee on December 1, 1950

• X refuses to accept the bill

• F then gives notice of dishonor to drawer A and to the indorsers B, C, D and E

• Under section 151, there is no necessity for presentment for payment and under this section, need not give a notice of dishonor by non- payment

• But suppose X drawee accepts the bill on December 15. F must then present the bill for payment to X on December 31. If X refuses to pay, F must give notice of dishonor to A, B, C, D, and E in order to charge them, as in the meantime the instrument has been accepted.

Sec. 117. Effect of omission to give notice of non-acceptance. - An omission to give notice of dishonor by non-acceptance does not prejudice the rights of a holder in due course subsequent to the omission. ILLUSTRATION PAY TO B OR ORDER P1000. SGD. A TO: X

*BCDEFG (holder in due course)

*F, when the instrument was still in his hands, presented the bill for acceptance to X and the latter refuses to accept the bill. F fails to give notice to B, C, D, and E.

*B, C, D, E are not discharged with regard to G because omission to give notice of dishonor by non-acceptance doesn’t prejudice the rights of a holder in due due course subsequent to the omission.

SUMMARY AS TO NOTICE OF DISHONOR

1. Like presentment for payment, notice of dishonor need not be given to persons primarily liable in order to charge them

2. But aside from presentment for payment to persons primarily liable, notice of dishonor to persons secondarily liable is necessary to charge the latter except—

a. When notice is waived

b. When dispensed with under Section 112 c. As to drawer, under Section 114 d. As to indorser, under Section 115

e. Where due notice of dishonor by non-acceptance has been given

f. As to a holder in due course without notice

Sec. 118. When protest need not be made; when must be made. - Where any negotiable instrument has been dishonored, it may be protested for non-acceptance or non-payment, as the case may be; but protest is not required except in the case of foreign bills of exchange.

WHEN PROTEST NECESSARY

• Protest is necessary with regard foreign bills of exchange

• Mere fact of protest is not conclusive upon the dishonor of the instrument and due notice to the indorser; other evidence is competent on these questions

• While protest is not required in cases of promissory notes and inland bills, it is usual to protest these instruments also when dishonored since the notary’s certificate of protest is the most convenient and certain mode of proving the facts

NOTES FOR WEEK #11 NOTES FOR WEEK #11 SEPTEMBER 3

SEPTEMBER 3 --7, 20077, 2007

VIII. DISCHARGE OF NEGOTIABLE INSTRUMENTS

Sec. 119. Instrument; how discharged. - A negotiable instrument is discharged:

(a) By payment in due course by or on behalf of the principal debtor;

(b) By payment in due course by the party accommodated, where the instrument is made or accepted for his accommodation;

(c) By the intentional cancellation thereof by the holder;

(d) By any other act which will discharge a simple contract for the payment of money;

(e) When the principal debtor becomes the holder of the instrument at or after maturity in his own right.

• In order to discharge the instrument, the payment must be a payment in due course, and second, a payment made by the principal debtor • If payment is made before the date of maturity, the instrument is not

discharged as the payment is not in due course

• Where payment is made by a party who is not a primary obligor or an accommodation party, his payment only conceals his own liability and those who are obligated after him. All prior parties primarily or secondarily liable on the bill, are liable to such a payer, and the payer may cancel indorsements subsequent to his own and reissue the paper, and it will be valid as against the prior parties

PAYMENT BY THIRD PERSONS

• If payment is made by a third person, the instrument is not discharged because payment is not made by the person principally liable

• Not any one who desires may pay the instrument and then recover of the maker. He must be a person who has in some way made himself liable for the payment of the instrument.

• Exception: where an instrument has been protested and someone voluntarily makes payment supra protest or for honor. And if the instrument was to give money in payment, the instrument is discharged.

SUMMARY OF DISCHARGE BY PAYMENT

1. Payment by a person ultimately liable, whatever his position in the paper, is a discharge of the instrument

2. Payment by an accommodation party isn’t a discharge of the instrument, whatever his position thereon and whether the indorsement be regular or anomalous

3. Payment by the drawer or indorser is not a discharge of the instrument PRINCIPAL DEBTOR

• Person ultimately bound to pay the debt PAYMENT BY CHECK OR OTHER NEGOTIABLE PAPER

1. When they actually have been cashed or

2. When, through the fault of the creditor, they have been impaired • A creditor isn’t bound to accept a check in satisfaction of his demand

because a check, even if good when offered, doesn’t meet the requirements of legal tender

WAIVER OF OBJECTION TO TENDER OF PAYMENT BY CHECK

• It is the general rule that an object to a tender must, to be available to the creditor, be made in good time and that the grounds for objection

must be specified; and that an objection to tender on one ground is a waiver of all other objections which could have been made at that time • It is ordinarily required of one to whom payment is offered in the form of a check, that he makes his objection at the time of the offer of by check instead of an offer of payment in money

• Reason for the rule—to afford the debtor the opportunity to secure the specific money which the law prescribes shall be accepted in payment of debts

PAYMENT BY ACCOMMODATED PARTY

• The one ultimately liable on the accommodation instrument is the latter

• Hence, his payment in due course discharges the instrument as if payment was made by the principal debtor under paragraph (a) INTENTIONAL CANCELLATION

• The cancellation must be intentional and made by the holder

• There must be an intention to cancel a negotiable instrument by the holder thereof as such intention is an essential element of discharge on a negotiable instrument and a negotiable note in a torn condition is presumed cancelled by the holder thereof

WILL AN EXTENSION OF TIME GRANTED BY THE HOLDER TO THE DEBTOR DISCHARGE THE INSTRUMENT?

• No, according to the majority view

• Because while it isn’t omitted in Section 120, it is omitted in Section 119

• Shows the legislative intent to that an extension of time by the holder will not discharge the instrument

PRINCIPAL DEBTOR ACQUIRES INSTRUMENT

• Reacquisition must be by the principal debtor and in his own right at or after the date of maturity

• In his own right—not in a representative capacity WHEN INSTRUMENT REACQUIRED BEFORE MATURITY

• A reacquisition by the principal debtor in his own right but before maturity will not discharge the instrument

• It will merely be a negotiation back to the principal debtor DISCHARGE BY OPERATION OF LAW

147 STATE INVESTMENT HOUSE V. CA