4 things re: history of the Negotiable Instruments Law


This is according to De Leon (2010). His books are available in fine bookstores nationwide.

Regarding the historical background of the Philippine Negotiable Instruments Law (Act No. 2031), there are four things to remember: the US Uniform Negotiable Instruments Act; the US Uniform Commercial Code; the president NIL in the Philippines; and the Code of Commerce.

[1] U.S. Uniform Negotiable Instruments Act. — Our law is patterned with very slight modifications after the Uniform Negotiable Instruments Act of the United States of 1896 drafted by the National Conference of Commissioners on Uniform State Laws.

The Conference was appointed in 1895 to revise and codify the law merchant in the United States as there was much confusion and lack of uniformity then in the court decisions on the subject resulting from the variety of statutes pertaining to commercial paper enacted by various state legislatures. This law, in turn, is based upon and largely copied from the English Bill of Exchange Act of 1882, a codification of the laws in England governing bills of exchange, promissory notes and checks. Most state legislatures adopted the Act as the main law for regulating commercial paper.

CASE: We have already seen that our own court has repudiated the assignment pro tanto theory, and since the adoption of the Negotiable Instrument Act by this state we are compelled to say that payment of a check is not equivalent to accepting a check in writing and signing the name of the acceptor thereon. Payment of the check and the charging of same to the drawer does not constitute an acceptance. Payment of the check is the end of the voyage; acceptance of the check is to fuel the vessel and strengthen it for continued operation on the commercial sea. What we have said applies to the holder and not to the drawer of the check. On this question we conclude that the general rule is that an action cannot be maintained by a payee of the check against the bank on which is draw unless the check has been certified or accepted by the bank in compliance with the statute, even though at the time the check is that an action cannot be maintained by a payee of the drawer of the check out of which the check is legally payable; and that the payment of the check by the bank on which it is drawn, even though paid on the unauthorized indorsement of the name of the holder (without notice of the defect by the bank), does not constitute a certification thereof, neither is it an acceptance thereof; and without acceptance or certification, as provided by statute, there is no privity of contract between the drawee bank and the payee, or holder of the check. Neither is there an assignment pro tanto of the funds where the check is not drawn on a particular fund, or does not show on its face that it is an assignment of a particular fund. The above rule as stated seems to have been the rule in the majority of the states even before the passage of the Uniform Negotiable Instruments Act in the several states. (G.R. No. L-43596. October 31, 1936)

[2] U.S. Uniform Commercial Code. — The Uniform Negotiable Instruments Act has been replaced in part by Article 3 and in part by other articles of the Uniform Commercial Code (U.C.C.) prepared under the auspices of the National Conference of Commissioners on Uniform State Law and the American Law Institute. Proposed for adoption by the legislatures of the states, the first draft of the Code was finished in 1952 although the Code is revised periodically, (see 11 Am. Jur. 2d 64.) The Code seeks to simplify and modernize the law of commercial transactions. Each state has adopted part or all of the Code.
CASE: The Court is also aware that under the Uniform Commercial Code in the United States of America, if an unaccepted draft is presented to a drawee for payment or acceptance and the drawee pays or accepts the draft, the person obtaining payment or acceptance, at the time of presentment, and a previous transferor of the draft, at the time of transfer, warrant to the drawee making payment or accepting the draft in good faith that the draft has not been altered. Nonetheless, absent any similar provision in our law, we cannot extend the same preferential treatment to the paying bank. (G.R. No. 168274. August 20, 2008)

[3] Act No. 2031. — Our Negotiable Instruments Law was enacted as Act No. 2031 on February 3,1911. It took effect 90 days after its publication on March 4,1911 in the Official Gazette of the Philippine Islands was completed. (Sec. 198.) The Act, therefore, took effect on June 2,1911. Since then, our Congress has not seen fit to amend any of its provisions. M The evident purpose of the Act is to facilitate transactions in commercial paper and to promote free flow of credit. Since then, our Congress has not seen fit to amend any of its provisions.

CASE: Section 1 Act No. 2031, otherwise known as the Negotiable Instruments Law, enumerates the requisites for an instrument to become negotiable, viz: (a) It must be in writing and signed by the maker or drawer; (b) Must contain an unconditional promise or order to pay a sum certain in money; (c) Must be payable on demand, or at a fixed or determinable future time; (d) Must be payable to order or to bearer; and (e) Where the instrument is addressed to a drawee, he must be named or otherwise indicated therein with reasonable certainty. The CTDs in question undoubtedly meet the requirements of the law for negotiability. The parties' bone of contention is with regard to requisite (d) set forth above. It is noted that Mr. Timoteo P. Tiangco, Security Bank's Branch Manager way back in 1982, testified in open court that the depositor reffered to in the CTDs is no other than Mr. Angel de la Cruz. (G.R. No. 97753. August 10, 1992)

[4] Code of Commerce. — Prior to the passage of Act No. 2031, the law then existing and in force as to negotiable instruments could be found in Book II of the Code of Commerce, from Articles 443 to 556. All these articles, with the exception of those on crossed checks, have been repealed. (Sec. 197.)

Among the different types of checks issued by a drawer is the crossed check. The Negotiable Instruments Law is silent with respect to crossed checks, although the Code of Commerce makes reference to such instruments. This Court has taken judicial cognizance of the practice that a check with two parallel lines in the upper left hand corner means that it could only be deposited and could not be converted into cash. Thus, the effect of crossing a check relates to the mode of payment, meaning that the drawer had intended the check for deposit only by the rightful person, i.e., the payee named therein. The crossing may be "special" wherein between the two parallel lines is written the name of a bank or a business institution, in which case the drawee should pay only with the intervention of that bank or company, or "general" wherein between two parallel diagonal lines are written the words "and Co." or none at all, in which case the drawee should not encash the same but merely accept the same for deposit. In Bataan Cigar v. Court of Appeals, we enumerated the effects of crossing a check as follows: (a) the check may not be encashed but only deposited in the bank; (b) the check may be negotiated only once – to one who has an account with a bank; and (c) the act of crossing the check serves as a warning to the holder that the check has been issued for a definite purpose so that he must inquire if he has received the check pursuant to that purpose; otherwise, he is not a holder in due course. (G.R. No. 141001. May 21, 2009)

SOURCE: De Leon and De Leon, Jr. (2010). The Philippine Negotiable Instruments Law. Atty. Hector S. De Leon and Atty. Hector M. De Leon, Jr. 978-971-23-6523-2. Rex Book Store. https://www.rexestore.com/negotiable-instrument-law-books/977-the-philippine-negotiable-instruments-law-revised-edition.html

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