Holders Flashcards
What is a HOLDER? (Sec. 191)
The payee or indorsee of a bill or note who is in possession of it or the bearer thereof.
What constitutes a HOLDER IN DUE COURSE? (Sec. 52)
A holder in due course is a holder who has taken the instrument under the following conditions:
1) That it is complete and regular upon its face;
2) That he became the holder of it before it was overdue, and without notice that it had been previously dishonored, if such was the fact;
3) That he took it in good faith and for value;
4) That at the time it was negotiated to him he had no notice of any infirmity in the instrument or defect in the title of the person negotiating it.
When is a holder not a holder in due course for instruments payable on demand? (Sec. 53)
Where an instrument is payable on demand is negotiated an unreasonable length of time after its issue, the holder is not deemed a holder in due course.
Why: because the length of time gives rise to a strong indication that it has already been dishonored.
When is a holder PRESUMED to be a holder in due course? (Sec. 59)
Every holder is deemed prima facie to be a holder in due course;
But when it is shown that the title of any person who has negotiated the instrument was defective, the burden is on the holder to prove that h or some person under whom he claims acquired the title as holder in due course.
But the last mentioned rules does not apply in favor of a party who became bound on the instrument prior to the acquisition of such defective title.
What are the rights of a HOLDER IN DUE COURSE?
1) He may sue on the instrument in his own name;
2) He may receive payment, and if the payment is in due course, the instrument is discharged;
3) He holds the instrument free from any defect of title of prior parties;
4) He holds the instrument free from defense available to prior parties among themselves;
5) he may enforce payment of the instrument for the full amount thereof against all parties liable thereon.
What are the rights of a holder NOT in due course?
1) He may sue in his own name;
2) He may receive payment, and if the payment is in due course, the instrument is discharged;
3) He is entitled to the instrument but holds it subject to the same defenses as if it were non-negotiable;
4) He has all the rights of the holder in due course from whom he derives his title, in respect of all parties prior to such holder, PROVIDED he is not himself party to any fraud or illegality affecting the instrument.
Protection of consumer against paying installment through financing companies for defective products. (R.A. No. 7394)
Xxx
In cases where the instrument will be sold at a discount to a bank, financing company or other lender, the said transferee shall be subject to all clams and defenses which the debtor could assert agains the seller of the consumer products obtained herein or with the proceed thereof.
INFIRMITY?
An irregularity in the instrument (e.g. notice of an alteration or forgery)
When title is defective? (Sec. 55)
The title of a person who negotiates an instrument is defective within the meaning of this Act…
When he obtained the instrument, or any signature thereto, by fraud, duress, or force and fear, or other unlawful means, or for an illegal consideration, or when he negotiates it in breach of faith, or under circumstances as amount to fraud.
What is the effect of Forged Signature? (Sec. 23)
When a signature is forged or made without authority of the person whose signature it purports to be it is wholly inoperative, and not right to retain the instrument, or to give a discharge therefor, or to enforce payment thereof against any party thereto, can be acquired through or under such signature, UNLESS the party against whom it is sought to enforce such right is precluded from setting up the forgery or want of authority.
