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Chapter II - Transfer - Coggle Diagram

- - - - D. How Indorsement is Made
        
        D1. By Signature/Instrument on Allonge (31) - Indorsement must be written on the instrument itself or, paper attached to it. Signature is sufficient without additional words.
        
        D2. Joint Payees - If instrument is indorsed/payable to X AND Y, indorsement by X or Y is not a valid negotiation. But, if alternative payees, indorsement by either one is valid.
        
        D3. Mispelled Name (43) - If the name of a payee/indorsee is wrongly designated or misspelled, they may indorse the instrument as described. Adding, proper signature if he sees fit.
        
        Allonge - Indorsement on a separate paper. Common law says only when there is no room on the instrument. But, NIL does not qualify, only requires that it be attached.
        
        E. Indorsement Must be Entire Instrument (32)
        
        F. Kinds of Indorsement (33)
        
        F1. Basis of Classification - Additional words which further modify the rights of subsequent holders or the liabilities of the indorser. It is the signature that perfects the indorsement.
        
        F2. Special & Blank indorsements (34, 40, 35) - Deals with whether future negotiation is through indorsement & delivery or delivery alone.
        
        F3. Qualified Indorsement (38) - Deals with the scope of liability of the indorser.
        
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        Special Indorsement - Specifies the person to whom or whose order the instrument is to be payable. The indorsement of this named indorsee is necessary for further negotiation.
        
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        Scope of Classification - These apply all at the same time. A blank, qualified indorsement, etc.
        
        G. Indorsement to/by collecting bank
        
        Deposit - A holder of a check can cash it with the drawee bank or, deposit it to his credit in the drawee/another bank.
        
        Direct Encashment - Payment to him by the drawee bank discharges the instrument and terminates all rights and liabilities to the parties thereto.
        
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        Indorsement for Deposit - Campos says conflicting resolutions.
        
        Restrictive - Restrictive because, it merely makes the bank an agent to collect the funds and credit them as a deposit to the customer's account. (PH VIEW)
        
        Non-Restrictive - Treating the transaction as a purchase of the check by the bank in cash and a deposit of such cash to the transferor.
        
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        Collecting Bank - a bank that collects money from the account of the writer of a check on behalf of the person who has deposited the cheque into the bank.
        
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        H. Negotiation by join or alternative payees or indorsees (41)
        
        I. Unindorsed instruments (49)
        
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        Joint Indorsement - Where an instrument is payable to the order of two or more payees or indorsees who are not partners, all must indorse, unless the one indorsing has authority for the others.
        
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        Alternative Payees - Either one in possession of the instrument is the holder. Thus, may negotiate the instrument alone, without prejudice to the obligation to the alternative payee.
        
        If two or more collecting banks
        
        Scope - Indorsement may not transfer parts of the amount payable or transfer the instrument to two or more indorsees severally.
        
        Partial Payment - if the instrument has been paid in part, it may be indorsed as regards the residue.
        
        Discount - Inodrsee pays the indorser less thant he face amount of the instrument , with the title transferring to the indorsee. This is a valid discount, no splitting of cause of action as title rests in purchaser. Considerations for discount is the period the purchaser has to wait before he can encase the instrument, which can only be done at maturity.
        
        Purpose - to protect the obligors from more than one action on the instrument. The maker and prior parties took the risk of only one cause of action against them.
        
        Effect of Non-Compliance - The transfer is not void, but not negotiation. instead, mere assignment of rights, subject to all defenses on the instrument.
        
        Status of Partial Payees - Neither of the partial payees can be considered holders. At most, mere assignees.
        
        Joint Indorsees - Valid indorsement, as the instrument is negotiated in its entirety to both payees. Both can subsequently negotiate the instrument jointly only.
        
        Alternative Payees (NIL 1) - Payable to 2 or more alternative payees negotiation of the instrument may be made by the indorsement of either of the payees
        
        Alternative Indorsees - Bawal
        
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        Negotiability - In this case, even if non-valid negotiation, the instrument is still negotiable. The transfer would only mean it is an assignment.
        
        Indorsement; How Made - Writing of the name of the payee on the instrument with the intent:
        
        either to transfer the title to the same or
        
        To strengthen the security of the holder by assuming a contingent
        liability for its future payment or both
        
        Form of Indorsement - No particular form, so long as there is intent to be bound. So long as in writing.
        
        Location of the Indorsement - The indorsement must be written on the instrument itself or upon a paper attached thereto. The signature of the indorser, without additional words, is a sufficient indorsement.
      - Order Instrument - Usually, on the back of the instrument (NIL 31) the indorsement constitutes a transfer of the sale of the instrument and it signifies the agreement of the indorser to answer for the amount in the instrument in case the maker/primarily liable party defaults on the obligation.
        
        Bearer Instrument - Mere delivery sufficient. However, common practice to indorse whenever there is transfer. This serves as additional security, as transferee can hold the indorser liable on the warranties as the seller of the bill + warranty of the indorser of payment in case of default of the primary party.
        
        Alternative Transfer - when an order instrument is delivered by the payee or special indorsee without his indorsement or where the indorsement is not made properly as required by law.
        
        Modes of Transfer - Negotiation, Assignment, Operation of Law (Succession).
        
        If assignment, operation, rights are not governed by NIL, but instead by the Civil Code or other laws concerning assignment/transfer of rights in relation to a contract.
        
        Effect of Assignment - Transferee only steps into the shoes of the payee-transferor. This means that transferee is subject to defenses against transferor.
        
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        Operation of Law - FRIA, Succession, etc. dependent on the type of transfer by operation of law. Thus, various rules.
        
        Delivery - Actual or constructive delivery sufficient.
        
        Delivery + Indorsement - Indorsement rules are determined by NIL.
        
        Importance of Delivery - Sir says delivery most important. It determines the validity of the negotiation.
    - - When Negotiated - If instrument is payable to order, negotiated by indorsement and delivery. Otherwise, mere delivery suffices.
      - Distinguished From Transfer - Transfer is a broader term than negotiation. There can be transfer without negotiation. In such cases, the transfer makes the subject of the transfer an assignee NOT a holder.
      - In an instrument payable to order, the payee/indorsee in possession is the holder. If bearer, person in possession is the bearer and the holder.
      - "Delivery" means transfer of possession, actual or constructive, from one person to another;
  - - - First Delivery - The first delivery of a complete instrument to a holder is called the issue or, issuance of the instrument.
        
        Presumption of Intent (NIL 191) - The law disputably presumes that once the instrument passes from the person who signed it, there has been a valid delivery
        
        Holder in Due Course - AS regards the holder in due course, such presumption is conclusive IF the instrument is complete.
        
        Mistaken Delivery/Delivery by Negligence (16) - If delivered to the wrong payee, but with intent, then, there is sufficient delivery. Effect will be person to whom the delivery was made cannot enforce the instrument.
        
        Sec. 16. Delivery; when effectual; when presumed. - Every contract on a negotiable instrument is incomplete and revocable until delivery of the instrument for the purpose of giving effect thereto.
        As between immediate parties and as regards a remote party other than a holder in due course, the delivery, in order to be effectual, must be made either by or under the authority of the party making, drawing, accepting, or indorsing, as the case may be; and, in such case, the delivery may be shown to have been conditional, or for a special purpose only, and not for the purpose of transferring the property in the instrument.
        
        But where the instrument is in the hands of a holder in due course, a valid delivery thereof by all parties prior to him so as to make them liable to him is conclusively presumed. And where the instrument is no longer in the possession of a party whose signature appears thereon, a valid and intentional delivery by him is presumed until the contrary is proved.
        
        Only actual/constructive delivery with intent is controlling.
      - Importance of Issuance - Perfects the instrument into a negotiable one.