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Acceptance for Honor

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Hanna Atinyao

on 17 November 2014

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Transcript of Acceptance for Honor

Legal Provisions
Payment for Honor

Legal Provisions
Acceptance for Honor

Case Study
Annotations
Ratio Decidendi
ABL 4
Group 3
Atty. Gene B. Calonge
The Negotiable Instruments Law
Sec. 174. Preference of parties offering to pay for honor. - Where two or more persons offer to pay a bill for the honor of different parties, the person whose payment will discharge most parties to the bill is to be given the preference.
Sec. 175. Effect on subsequent parties where bill is paid for honor. - Where a bill has been paid for honor, all parties subsequent to the party for whose honor it is paid are discharged but the payer for honor is subrogated for, and succeeds to, both the rights and duties of the holder as regards the party for whose honor he pays and all parties liable to the latter.
Sec. 176. Where holder refuses to receive payment supra protest. - Where the holder of a bill refuses to receive payment supra protest, he loses his right of recourse against any party who would have been discharged by such payment.

Sec. 177. Rights of payer for honor. - The payer for honor, on paying to the holder the amount of the bill and the notarial expenses incidental to its dishonor, is entitled to receive both the bill itself and the protest.
Sec. 171. Who may make payment for honor. - Where a bill has been protested for non-payment, any person may intervene and pay it supra protest for the honor of any person liable thereon or for the honor of the person for whose account it was drawn.
Sec. 172. Payment for honor; how made. - The payment for honor supra protest, in order to operate as such and not as a mere voluntary payment, must be attested by a notarial act of honor which may be appended to the protest or form an extension to it.
Sec. 173. Declaration before payment for honor. - The notarial act of honor must be founded on a declaration made by the payer for honor or by his agent in that behalf declaring his intention to pay the bill for honor and for whose honor he pays.
Sec. 161. When bill may be accepted for honor. - When a bill of exchange has been protested for dishonor by non-acceptance or protested for better security and is not overdue, any person not being a party already liable thereon may, with the consent of the holder, intervene and accept the bill supra protest for the honor of any party liable thereon or for the honor of the person for whose account the bill is drawn. The acceptance for honor may be for part only of the sum for which the bill is drawn; and where there has been an acceptance for honor for one party, there may be a further acceptance by a different person for the honor of another party.
Sec. 162. Acceptance for honor; how made. - An acceptance for honor supra protest must be in writing and indicate that it is an acceptance for honor and must be signed by the acceptor for honor.
Sec. 163. When deemed to be an acceptance for honor of the drawer. - Where an acceptance for honor does not expressly state for whose honor it is made, it is deemed to be an acceptance for the honor of the drawer.
Sec. 164. Liability of the acceptor for honor. - The acceptor for honor is liable to the holder and to all parties to the bill subsequent to the party for whose honor he has accepted.
Sec. 165. Agreement of acceptor for honor. - The acceptor for honor, by such acceptance, engages that he will, on due presentment, pay the bill according to the terms of his acceptance provided it shall not have been paid by the drawee and provided also that is shall have been duly presented for payment and protested for non-payment and notice of dishonor given to him.
Main Issue
Social
Republic of the Philippines
SUPREME COURT
Manila
Third Division
G.R. No. 157309
March 28, 2008
MARLOU L.
VELASQUEZ
vs.
SOLIDBANK
CORPORATION

" IN THE VIEW OF THE FOREGOING, judgment is hereby rendered ordering the defendant:
(1) to pay the plaintiff the principal sum of P1,495, 115.16 plus interest at 20% per annum counted from February 22, 1993 up to the time the entire amount shall have been fully paid;
(2) to pay attorney’s fees equivalent to 10% of the total amount due the plaintiff; and
(3) to pay the costs.
SO ORDERED. "

" WHEREFORE, premises considered, the assailed Decision is hereby AFFIRMED with MODIFICATION. Defendant-appellant Marlou L. Velasquez is hereby ordered to pay plaintiff-appellee Solidbank Corporation, the following: (1) the principal amount of One Million Four Hundred Ninety-Five Thousand One Hundred Fifteen and Sixteen Centavos (P1,495,115.16) plus interest at twelve percent (12%) per annum from February 22, 1993 until fully paid, (2) attorney’s fees equivalent to five percent (5%) of the total amount due, and (3) costs of the suit.
SO ORDERED. "

Acceptance for Honor
and
Payment for Honor

Payment for Honor
Payment for honor or payment
supra protest
* Instruments covered: bill of exchange only
* when made: after bill has been protested for non-payment ; may not be made before the instrument has been protested and notice of dishonor has been given to the drawer
Requisites of valid payment for honor
bill been protested for non-payment
attested by a notarial act of honor which may be appended to the protest or form and extension to it
notarial act must be based on the declaration by payor for honor of his intension to pay the bill for whose honor he pays
Procedure in making a payment for honor
payor or his agent goes to a notary public and declares his intention to pay the bill and for whose honor he pays
notary recards declaration in the protest or in a separate paper attatched to it
payor notifies person for whose honor he pays within reasonable time
NOTE:
if formalities are not followed, payment will operate as a mere voluntay payment, and the payor acquires only rights stated in Articles 1236 & 1237 of the Civil Code and not those in Sec 175(NIL)
Effects of payment for honor
- where bill has been paid for honor, all parties subsequent to the party for whose honor it is paid are discharged but the payor for honor is subrogated for, and succeeds to both the rights and duties of the holder as regards the party for whose honor he pays and all the parties liable to the latter.
Effect of refusal to receive payment for honor
- if holder refuses to receive payment under protest, he loses his right to recourse against any party who would have been discharged by such payment

Rights of a payer for honor
acquires rights of the holder
receive both the bill and the protest(to enable payer to enforce his rights against those who are liable to him under Sec175(NIL)
Distingush acceptance for honor and payment for honor
Regional Trial Court
Court of Appeals
" WHEREFORE, the petition is DENIED for lack of merit. The Decision of the Court of Appeals dated June 27, 2002 is hereby AFFIRMED.
SO ORDERED. "

Supreme Court
Facts
Acceptance of Honor
Sec. 166. Maturity of bill payable after sight; accepted for honor. - Where a bill payable after sight is accepted for honor, its maturity is calculated from the date of the noting for non-acceptance and not from the date of the acceptance for honor.
Sec. 167. Protest of bill accepted for honor, and so forth. - Where a dishonored bill has been accepted for honor supra protest or contains a referee in case of need, it must be protested for non-payment before it is presented for payment to the acceptor for honor or referee in case of need.
Sec. 168. Presentment for payment to acceptor for honor, how made. - Presentment for payment to the acceptor for honor must be made as follows:
(a) If it is to be presented in the place where the protest for non-payment was made, it must be presented not later than the day following its maturity.
(b) If it is to be presented in some other place than the place where it was protested, then it must be forwarded within the time specified in Section one hundred and four.
Sec. 169. When delay in making presentment is excused. - The provisions of Section eighty-one apply where there is delay in making presentment to the acceptor for honor or referee in case of need.
Sec. 170. Dishonor of bill by acceptor for honor. - When the bill is dishonored by the acceptor for honor, it must be protested for non-payment by him.
Annotations
... whether or not petitioner should be held liable to respondent under the sight draft or the letter of undertaking. There is no dispute that petitioner duly signed and executed these documents. It is likewise admitted that the sight draft was dishonored by non acceptance by the Bank of Seoul.
Acceptance of bill of exchange
- act by which the drawee assents to the request of the drawer to pay it or engages himself liable to pay it when it is due
Honor
- to accept a bill of exchange; to pay a bill accepted on the day it becomes due
• November 12, 1992
o Petitioner applied for credit accommodation with respondent bank for pre-shipment financing. The credit accommodation was granted. Petitioner was successful in his first two export transactions both drawn on the letter of credit. The third export shipment, however, yielded a different result.
• February 22, 1993
o Petitioner submitted to respondent the necessary documents for his third shipment. Wanting to be paid the value of the shipment in advance, petitioner negotiated for a documentary sight draft to be drawn on the letter of credit, chargeable to the account of Bank of Seoul. The sight draft represented the value of the shipment in the amount of US$59,640.00.
o By virtue of the letter of undertaking, respondent advanced the value of the shipment which, at the current rate of exchange at that time was P1, 495,115.16, less bank charges, to petitioner. Respondent then sent all the documents pertinent to the export transaction to the Bank of Seoul.
o Respondent failed to collect on the sight draft as it was dishonored by non-acceptance by the Bank of Seoul. The reasons given for the dishonor were late shipment, forged inspection certificate, and absence of countersignature of the negotiating bank on the inspection certificate. Goldwell Trading likewise issued a stop payment order on the sight draft because most of the bags of dried sea cucumber exported by petitioner contained soil.
o Due to the dishonor of the sight draft and the stop payment order, respondent demanded restitution of the sum advanced. Petitioner failed to heed the demand.
• June 3, 1993
o Respondent filed a complaint for recovery of sum of money with the RTC in Cebu City. In his answer, petitioner alleged that his liability under the sight draft was extinguished when respondent failed to protest its non-acceptance, as required under the Negotiable Instruments Law (NIL). He also alleged that the letter of undertaking is not binding because it is a superfluous document, and that he did not violate any of the provisions of the letter of credit.
• September 25, 1996
o the RTC rendered judgment in favor of respondent
Acceptance for Honor / '
supra protest
'
- any person not a party already liable thereon may intervene and accept the bill under protest for the honor of any liable party.
Purpose of Acceptance of Honor
- acceptance is done to save the credit of the parties of the instrument
- done when the original drawee refuse the bill for the honor of any of the parties thereto
- done to insure the benefit of all parties subsequent to the original drawee for the holder
Requisites for Acceptance
bill must have been protested for non-acceptance or better security
bill is not overdue
acceptor for honor must be a stranger to the bill
holder must give his consent
How acceptance for honor is made
- must be in writing, indicating that it is an acceptance for honor, and signed by person making the acceptance
* acceptor for honor appears before a notary public, with witnesses,and declares that he accepts such protested bill in honor of the holder/ indorser
* acceptance may be for whole or part only of the sum for which the bill is drawn
* an acceptor for honor cannot accept the bill for the honor of two or more persons
*there cannot be two or more acceptors for the honor of the same party
When acceptance deemed for the honor of drawer
- if an acceptence for honor made without specifying the person for whose honor it is made
Liability and Warranties of an acceptor for honor
- acceptor for honor is liable to the holder and to all parties to the bill subsequent to the party for whose honor he has accepted
- by acceptance, acceptor for honor engages that he will, on due presentment, pay the bill according to terms of acceptance, provided it shall not have been paid by the drawee and that it shall not have been presented for payment and protested for non-payment and notice of dishonor given to him.
NOTES:
* there may be several acceptors for honor
* acceptor for honor is only secondarily liable
* when the bill is dishonored by the acceptor for honor, iot must be protested for non-payment by him
* payment by the acceptor for honor does not discharge the bill
Rights of an Acceptor for Honor
- after payment of holder, acceptor can ask reimbursment from the party honored and to all parties liable on the bill to him (acceptor must give notice for whose honor he pays, otherwise, honored person is not obliged to refund)
* party accepts for the honor of the drawer only --- GR: no recourse against subsequent indorsers
When acceptor for honor liable
- liability: to pay if the original drawee, upon presentment, should persist in dishonoring the bill and notice thereof by protest be given to the person so accepting
Requisites of Acceptor's liability
bill must be presented for payment to the drawee on maturity
if payment is refused, bill must be protested for non-payment
notice of protest should be given to acceptor for honor

NOTE: the holder must protest for non-payment by the acceptor for honor in order to fix liabilities of the indorsers
acceptance for honor
protested for non-acceptance or for better security
bill must not be overdue
acceptor must not be a party already liable on the bill
consent of holder required
payment for honor
protested for non-payment
bill may be overdue
payor may be a party to the bill
consent of holder not required
Full transcript