NEGOTIATION OF NEGOTIABLE INSTRUMENTS
Sec. 30. What constitutes negotiation. - An instrument is negotiated when it is transferred from one person to another in such manner as to constitute the transferee the holder thereof. If payable to bearer, it is negotiated by delivery; if payable to order, it is negotiated by the indorsement of the holder and completed by delivery.
METHOD OF TRANSFER
1. By assignment
2. By operation of law
3. By negotiation, which may be completed by indorsement completed by delivery or by mere delivery
• Method of transferring a non-negotiable instrument whereby the assignee is merely placed in the position of the assignor and acquires the instrument subject to all defenses that might have been setup against the original payee
MODE OF ASSIGNMENT
• Differs in no respect from that of any other contract
• Although some sort of written instrument is customarily employed, it may be written either on the instrument itself or on a separate piece of paper
EFFECT OF ASSIGNMENT OF A NON-NEGOTIABLE INSTRUMENT
• The effect of the assignment is that the party holding the right drops out of the contract and another takes his place
• The assignee is substituted in place of the assignor
• The assignee and every subsequent person to whom the instrument comes by assignment may be considered as the person who made the instrument in the first instance and as having said and done everything in making the instrument which the original assignor did or said.
• Each assignee takes his chance as to the exact position in which any party making an assignment of it stands
• And as it is called in law, the assignee takes the contract subject to equities, that is, to defenses to the contract which would avail in favor of the original party up to the time the notice of the assignment is given to the person against whom the contract is sought to be enforced
ASSIGNMENT OF A NEGOTIABLE INSTRUMENT
• A person taking a negotiable instrument by assignment in a separate piece of paper takes it subject to the rules applying to assignment
• And where the holder of a bill payable to order transfers it without indorsement, it operates an equitable assignment
TRANSFER BY OPERATION OF LAW
1. By the death of his holder where the title vests in his personal representative, or
2. By the bankruptcy of the holder, where title vests in his assignee or trustee
3. Upon the death of a joint payee or indorsee in which case the general rule is that the title vests at once in the surviving payee or trustee
• Transfer of the instrument from one person to another in such a manner as to constitute the transferee the holder thereof
• May either be by indorsement completed by delivery or by mere delivery
IS DELIVERY TO PAYEE A NEGOTIATION?
• First view: no because negotiation refers to an existing negotiable instrument and before delivery to the payee, the instrument is incomplete.
• Second or better view: under this section and section 191, an instrument is negotiated when it is delivered to the payee or to an indorsee