CHAPTER VII DISCHARGE OF NEGOTIABLE INSTRUMENT ‘Sec. 119. instrument Instrument is discharged — (2) By payment in due course by or on behalf of the principal debtor; (©) By payment in due course by the party accommo dated, where the Instrument ls made or accepted for 8e- ‘commodation; (6) By the Intentional cancelation thereof by the holder; () By any other act which will lecharge simple ‘contract forthe payment of money: {@) When the principal debtor becomes the holder of the Instrument at or after maturlly In le own Fight. Ww discharged. — A negotiable Meaning and effect of scharge ‘of instrument. Discharge of an mstrument means a release of all parties. whether primary or secondary, from the obligations arising thereunder. It renders the instrument without force and effect and, consequenlyitcan no longer be negotiated, (Young v. Car, 26 2] $55) Concept of discharge. ‘The word “discharge” is used in the Negotiable Instruments Law in reference both tothe instrument itself and to the parties tot (Cannon v. Bronston, 55 $.W. 2d 358.) The law provides for discharge of the instrument by specified methods (See. 119), “ar thee Nee ese and for discharge of persons secondary able alo by speed imethods. (Se 120) " ” Discharge ofthe instrument obviously inciudes discharge ofthe person or persons primarily able on it ands person Secondary lable onan irumen iano discharged by anc ‘which discharges the iatrument (1 Am Jur 24 86547) athe for tacharg of natant The Negotiable Instrments Lav contain no expres prov- sion for rican of party pray lable Toe obvious rons ihttnone incest Such pry sabes bound pay thet instance, at canbe ced oly by chara fe incrumnt tolerant Nat bar Sith 190 521), The meahods forthe dchage of w negotiable instrument provided in Section 19 ae exhaive (Od upon the fame Tic that herpes mention of one tng inp thr excon ‘lanother (andrord ares vBank 568) Tse tert poo dated check wasnerely ued a est rt found fr the duc he nse ap shit itloe couse o whom fe instument was negated whos toknowledge and conentof the maker or drawer Satine trem Hose nev Court of Appel 277 SCRA32 951) (0) Peymetby princi dor —The genera eit when anutuntent upon ohta ere atkins primal ‘Cre scondariy it irene by Ren whos pry hob Compete dacharge eau In longer hes eal exten. ‘ooo v Bache 16 Wie 21) mores tht payment may produce he fect of icaring thn cr sb) at be mee ot nbehalot the principal eso) ator ae sat.) ‘Tete thro (on god faith and without race ta the dese edefecive ac 8) Hence payment Stanger tril not discharge he nrment ures he payment othe ‘Ehtor bee An ize coe) The term principal debtn” 9wsed in Seco 191) rane nT sould be inerped fo mean est hat TAT ee ote person wba bound pay debtand not necessary to the “person primarily lable” on the inrment are Se. 192) 0, paymen by an acommodaton party tea guarantor orsuety wil not dachage te istrument Sincthefsnat the “principal debtor Tt must be remembered thatthe older isnot bound to accept payment by check or ster nogetable intument beets it {floor meet the regiments alga tender (Art 183, Cv Code; Belisario vs. Natividad, 60 Phil. 156 (1934].) (2) Payrent by accommodated party. — As between the sccommodution pty andthe accommedted party. theaters the real bor Hence payment by te aceomteodated party actually paymnentby te poncpal debtor and tsa true whether Te apybun oo party to he nrumet et (3) intentional cenceltion of nstrament by hdr ~ To effect « discharge of the intrumert, the cancelation as (a) be Intentionally done (0) bythe holder thereuCancelation may be doneby wring the word “canceled” or “pad” on the foc thclnstrumerts There alan cancelation when the instrument tornup,bumed, mutated rdesnoyed, The presumption stat thecancelanon ntentonl (8) Any act hich dcr a contrac. — Ast other acs of indhanp corso the poy of terete In on Staton and contacts and ae esng egacons wil spply. ce art 18, Chil Ce, Sec 196) Aric 1231 ofthe Civil Code provides Obligations are extinguished {0 By payment or performance; (2) By teow of the thing doe €) By the condonation or remislon of the debts; (8) By the confuvon or merger of the ight of eedtr and debe (5) By compensation (6) By novation Other cautesofexingushing of obligations such a ann tment, resin, illment os resautey candi end pe ‘Caption ae govemed eae ints Code™ [Note that whe the various causes of discharging a simple ‘contrat such a payment, condonation, ef wil operate ‘discharge the instrument as between the immediate pares, they will notin the hands of aholderm due cour (5) Resouston by principal debtor nhs wn righ — order thatthore wl bedncharge under section) the easton rmuntbe (a by the princi dab ihisown igh and lat ‘rater the date of matty When the poncipal debtor becomes the holder of the instrament hie wm sight, the instrment lischarged because ofthe merger in hs person of the characters ‘of eredior and debtor (Art. 1275, Ci Code) nis own eight” means not i «representative capacity. (Schavearteman v Post BC NY. Supp. 922) So ifthe debtor reacquirs the utrument 2s the aget of another ora pledge from the holder, or as admisratr ofthe intestate cate Of the hold he doesnot do so nhs own right The eacquisition ‘must be “al or after mahuty” otherwise no discharge wil he ae OTST, renegotiate the same under Section 5) ‘Sec. 120. When person secondary Hable on he nso ‘mentor ischargod— A person secondary lable onthe ‘Tabumentis achargwo (9) By anya wich secharge eaten (©) By the Intentional cancelation of his signature by {e) By the dlschage ofa pir party: (6) By aval ander of payment made by apie pany, (e) By a rte of oe principal debtor, unease holder's Hoht of recourse against he party secondeny Ubi a expressly revered. (0) By any agreement binding upon the noler to ‘extend the time of paymant, oft postpone the holder's fight fo enforce the Instrument, unless made wih the Dent ofthe party sacondarly Table, oF unless the right ‘trecourse agnet such party i xprosey reserved.™ "HS NBGOTIABLE INSTRUMENTS LAN seu Methods of discharge of secondary parties. Section 120 applies only to partes secondarily Hable on the instrament. A maker even though he be a surety fora co-maker (Niotaze State Bank v. Cooper, 162 Pac. 1169.) an accommodation co-maker (Ford . Schall, 221 Pac 1052), and an accommodation acceptor (Davis ¥. Simpson, 21 Ala. 616) are not persons secondarily liable within this section. (1) Any act which discharges instrument. — Ifthe instrument is discharged under Section 119, it ceases to have force and effect. Hence, all partes, whether primarily or secondarily liable, will also be discharged. But a discharge of a secondary party does not effect a discharge ofthe instrument itselt. (2) Intentional cancellation of signature. — Ifthe holder inten- tionally strikes out the signature ofa person secondarily liable, the effect isto discharge him from lability on the instrument a5, ‘fhe has never been a party to the same. And no consideration is necessary to support such discharge. (McCormick v. Shea, 99 N.Y. Supp. 467.) However the right of a holder to cancel the sig nature ofan indorser is subject to the imitation thatthe indorse- ‘ment isnot necessary to the holder's title. Sec. 48.) (8) Discharge of prior party by act of holder. — The disehange of «a party as by intentional cancellation of his signature (subsection Ib]) also operates as a discharge of parties subsequent to the party discharged. The reason for the rule is that che discharge deprives a subsequent party of aright of recourse against the patty discharged by the holder. “Prior party” is not limited to pir incorsers but includes as well principal debtors within its ‘meaning (Davis v, Cuthel, 152 Pac. 14) Suisection (©) applies only to discharge by the act of the holder and not to discharges by operation of lave. Therefore, it-does not include a discharge by bankruptcy (Silverman ¥. Rubenstein. 162 N.Y. Supp. 733) or a discharge by the statute of limitations (Romero v. Hopweel 210 Pac. 231), ora discharge of 2 party for failure of the holder to give him notice of dishonor. (West River Bank v. Taylor 4 N.Y. 128; soe Sec. 68, 2nd sentence) (4) Vall tender of payment, — “Tender of payment” means the act by which one produces and offers to a person holding “fa Datagram eran ™ ‘aim or demand against him the amount of money which he ‘considers and admis tobe due, i satisfaction of such claim oF ‘demand without any spulation or condition, (slinas Ells: 2 SEI) ‘Avalid tender of payment made by a prior party if accepted, ‘would result inthe discharge of sald party and necessary of All parties subsequent to him (subseeson [e) Its ut jst, therefore that the holder's refusal without any usable reseon telacept valid tender af payment made bya Pic party hold ‘he: artes. (Sc. 70) The refusal accept the tender doesnot operate to discharge the debt but the tender stops the running of interest and reeves the party making the fender from subsequent lability for costs and atlorney’s fees se of ligation (5) Release ofthe principal debtor by at of older — The release ofthe principal debor discharges the instrument and, theelore, Sl the secondary paris ae also discharged. Moreover with the release ofthe principal deboe, subsequent paris lve thir "ight of recourse against him. Such, however, would not be the ‘ie if he holder reserved his right of recourse againet the sid Subsequent partis, for then the effect of the reservation by the holder of his right i the implied reservation by the subsequent Parties oftheir ight of recourse against the principal debtor This servation of the ight of recourse must be express. Hence, it Cannot be implied from acts and conduct (Phoenis ¥. Nat Bank, ee5.W-830) ‘As under subsection (c), the release ofthe principal debtor mst bby the act ofthe holder and not by operation of ae ike Shudgment fr the maker in an unsuccessful suit by the indore ‘gait hi. (Highleyman v McDowell Motor Car Co, 2165 W. 2) AMPLE: ‘Suppose M ithe maker ofan instrument payable 0 the conter fPiho indorsed tA By ATSB, and bY BIOG the Present bolder FC mene M, the malar PA. and 8. the persons abe ar howe decharpe Battin reaing SC pely rerve emg gat Oe pars sca r- /