Negotiable Instruments Law – Holder in Due Course

NEGOTIABLE INSTRUMENTS LAW

Memory Aid

Based on the Outline of the 1994 Edition of Campos & Campos

HOLDER IN DUE COURSE

HOLDER

Sec. 191

RIGHTS OF HOLDER

  1. sue thereon in his own name
  2. payment to him in due course discharges instrument

 

HOLDER IN DUE COURSE: REQUISITIES

  1. complete and regular upon its face
  • sec. 124 (effect of alteration)
  • sec. 125 (what constitute material alterations)
  1. holder became such before it was overdue, without notice of any previous dishonor
  • sec. 53 (demand inst. nego after unreasonable length of time: not HDC)
  • sec. 12 (effect antedating/postdating)
  1. taken in good faith and for value
  • sec. 24 (presumption of consideration)
  • sec 25 (definition. of value)
  • sec. 26 (definition. holder for value)
  • sec. 27 (lien as value)
  1. at time negotiated to him, he had no notice  (sec. 56-def;  54-notice before full amt. paid) of —
    1. infirmity in instrument
    2. defect in title of person negotiating
      1. instrument/signature obtained through fraud, etc., illegal consideration/means, or
      2. instrument negotiated in breach of faith, or fraudulent circumstances

 

RIGHTS OF HOLDER IN DUE COURSE:

  1. holds instrument free of any defect of title of prior parties
  2. free from defenses available to prior parties among themselves
  3. may enforce payment of instrument for full amount, against all parties liable

 

* if in the hand of any holder (note definition of holder) other than a HDC, vulnerable to same defenses as if non-negotiable

 

RIGHTS OF PURCHASER FROM HOLDER IN DUE COURSE:

General Rule: in the hands of any holder other than a HDC, NI is subject to same defenses as if it were non-negotiable.

Exception: holder who derives title through HDC and who is not himself a party to any fraud or illegality has all rights of such former holder in respect to all parties prior to the latter.

 

WHO DEEMED HDC

  • prima facie presumption in favor of holder
  • but when shown that title of any person who has negotiated instrument was defective (sec. 55—when title defective): burden reversed (now with holder)
  • but no reversal if party being made liable became bound prior to acquisition of defective title (i.e., where defense is not his own)

 

Reference:  University of the Philippines

BarOps ’99

Commercial Law – Val Feria, Mina Herrera, Gary Mallari & Rachel Ramos

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About Magz

First of all, I am not a lawyer. I'm a graduate of AB Political Science and went to the College of Law but stopped going to law school for some reasons. I'm a passionate teacher who has been teaching English to speakers of other languages and a person who likes writing and blogging. I lost some important files and software when my computer broke down so the reason I created this website is to preserve the notes, reviewers and digests I collected when I was at the law school and at the same time, I want to help out law students who do not have enough time to go and read books in the library.

Posted on December 19, 2011, in Negotiable Instruments Law and tagged . Bookmark the permalink. Leave a comment.

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