BILLS, NOTES, AND COMMERCIAL PAPER

COURSE OUTLINE1

INTRODUCTION

1. Kinds of negotiable instruments

2. Parties and the nature of their liabilities
3. Functions of negotiable instruments
Cases:
Federal Corporation v. Antonino, GR 199455, Jun 27, 2018
MBTC v Chiok, GR 172652, Nov 26, 2014
4. The concept of negotiability
5. The origin of negotiable instruments
6. History of the NIL
7. Applicability of NIL
Case:
Rivera v. Chua, GR 184458, Jan 14, 2015
Banco de Oro v. Equitable Bkg. Corp., GR 74917, Jan 20, 1988

CHAPTER I
REQUISITES OF NEGOTIABILITY

1. Requisites of Negotiability (1, 184, 126)

Case:
De Leon v. Rodriguez, GR 202658, Jun 17, 2019
2. Written form & signature (18 & 19)
3. Unconditional order or promise to pay
a. When unconditional (3)
Cases:
Powell & Powell v. Greenleaf v. Currier
Irving Trust Co. v. Leff
4. Sum payable must be certain (2)
5. Payable in money
Case:
Incitti v. Ferrante, et al.
6. Certainty of time of payment
a. When payable on demand (7)
b. Payable at a fixed time
c. Payable at a determinable future time (4, 11, 17)
d. Effect of acceleration provisions
Cases:
Rehabilitation Finance Corp. v. CA

1
Prof. JJ Disini’s syllabus, based on Campos’ textbook.

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 Utah State Nat. Bk. V. Smith
Puget Sound State Bk. V. Washington Paving Co.
Henry Madison Aerie No. 623
e. Provisions extending time of payment
Cases:
State Bk. Of Halstad v. Bilstad
Security Natl. Bk of Sioux City v. Gunderson
7. Must payable to order or bearer
a. When instrument is payable to order (8)
b. When instrument is payable to bearer (9)
Cases:
Traders Royal Bank v. CA, GR 93397, Mar 3, 1997
PNB v. Sps. Rodriguez, GR 170325, Sep 26, 2008
UCPB v. Zapanta Realty, GR 235893, Jun 6, 2018
Wettlaufer v. Baxter
Ang Tek Lian v. CA
Virata v. Ng Wee, GR 220926, Jul 5, 2017
8. Parties must be designated with certainty
a. Maker & drawer
b. Payee (8)
c. Drawee (128,130)
Case:
Pacheco v CA, GR 126670, Dec 2, 1999
9. Provisions not affecting negotiability (5)
Case:
Phil. Natl., Bk. Vs. Manila Oil Refining & By Products Co.
10. Omissions not affecting negotiability (6)
Case:
Evangelista v Mercator Finance, GR 148864, Aug 21, 2003
11. Rules of construction (17)
Case:
Continental Illinois Bank 7 Trust Co. v. Clement

CHAPTER II
TRANSFER

1. Delivery & Issuance (16)

Cases:
SMC v. Puzon, GR 167567, Sep 22, 2010
In Re Marten’s Estate
2. Negotiation (30, 191)
3. Methods of negotiation
4. How indorsement made
a. By signature on instrument or on allonge (31)
Case:

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 Clark v. Thompson, et al.
b. In case of joint payees
c. If name misspelled (43)
Case:
Young v. Hembree
5. Indorsement must be entire instrument (32)
Case:
Blake v. Weiden
6. Kinds of indorsements (33)
a. Basis of classification
b. Special & blank indorsements (34, 40, 35)
c. Qualified indorsement (38)
Cases:
Fay v. Witte
Copeland v. Burke
Hutson v. Rankin
Gonzales v RCBC, GR156294, Nov 29, 2006
d. Conditional Indorsement (39)
e. Restrictive indorsement (36, 37)
Cases:
White v. Natl. Bank
7. Indorsement to or by collecting bank
Case:
Leonardi v Chase Natl. Bank
BDO Unibank v. Lao, GR 227005, Jun 19, 2017
8. Negotiation by join or alternative payees or indorsees (41)
Case:
MBTC v BA Finance, GR 179952, Dec 4, 2009
9. Unindorsed instruments (49)
Cases:
Simpson v. First Natl. Bk. Of Roseburg
Furbee v. Furbee
Whistler v. Forster
10. Cancellation of indorsements (48)
11. Indorsement by agent (44)
12. Presumption as to indorsements (45, 42)
13. Continuation of negotiable character (47)

CHAPTER III
HOLDER IN DUE COURSE

1. Holder in due course (52)

2. Rights of a holder in due course (57, 58)
Case:
Bank of Phil. Is. V. Alfred Berwin & Co.

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3. Holder for value
a. What constitutes value (24, 25)
Case:
Pua v. Tiong & Teng, GR 198660, Oct 23, 2013
Elgin Nat. Bk. V. Goecke
b. Bank credit for value
Cases:
Merchant’s Natl. Bank of St. Paul v. Sta. Maria Sugar Co.
Natl. Bank of Commerce v. Morgan
c. What constitutes a holder for value? (26)
d. Where holder has a lien on instrument (27)
e. Burden of proof (24)
Ubas v. Chan, GR 215910, Feb. 6, 2017
4. Holder in good faith (55, 56)
a. Notice; bad faith; effect of suspicious circumstances
Cases:
Unaka Natl. Bk. V. Butler
Vicente R. de Ocampo & Co. v. Gatchalian
State Investment House v. IAC
Bataan Cigar v CA, GR 93048, Mar 3, 1994
Atrium Mgt Corp v CA, GR 109491, Feb 28, 2001
Yang v CA, GR 138074, Aug 15, 2003
Metrobank v PBCOM, GR 141408 & 141439, Oct 18, 2007
Hi Cement v Insular, GR 132403 & 132419, Sep 28, 2007
Dino v Judal-Loot, GR 170912, Apr 19, 2010
Go v MBTC, GR 168842, Aug 11, 2010
Equitable v. Special Steel, GR 175350, Jun 13, 2012
b. Financing company not a holder in good faith as to buyer
Cases:
Consolidated Plywood Industries, Inc. v. IFC Leasing & Acceptanc.
Salas v. CA
Commercial Credit Corp. v. Orange County Machine Works
c. Effect of purchase at a discount
Case:
Ham v. Meritt
d. Effect of notice before full payment (54)
Case:
Pennoyer v. Dubois State Bank
e. Constructive notice not sufficient
Case:
Foster v. Augustanna College
f. Notice of accommodation not notice of defect (29)
5. Complete & regular (124)
Cases:
Miles City Bank v. Askin

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 Bronson v. Stetson
6. Holder at or after maturity & without notice of dishonor (53)
Cases:
Bliss v. California Coop. Producers
Barbour v. Finke
Le Due v. First Natl. Bk. Of Kasson
Idaho State Bk. V. Hooper Sugar Co.
Dunn v. O’Keefe
7. Effect of postdating or antedating
Case:
Triphonoff v. Sweeney
8. Effect of qualified, conditional & restrictive indorsements
9. Payee as holder in due course
Case:
BPI v Roxas, GR 157833, Oct 15, 2007
Howard Nat. Bank v. Wilson
10. Rights of a purchaser from a holder in due course (58)
Cases:
Pierce v. Carlton
Lill v. Gleason
Fossum v. Fernandez
11. Presumption in favor of due course holding (59)
Cases:
Yang v CA, GR 138074, Aug 15, 2003
Asia Banking Corp. v. Tan Sen Guan
Van Syckel v. Egg Harbor Coal & Lumber Co.
Beacon Trust Co. v. Ryder
Farmers’ State Bank v. Koffler
12. Transfer of unendorsed instrument (49)
Case:
BPI v CA, GR 136202, Jan 25, 2007
MBTC v Chiok, GR 172652, Nov 26, 2014
Commercial Bank of Lafayette & Trust Co. v. Barry

CHAPTER IV
DEFENSES & EQUITIES

1. Defenses & equities in general (57, 58, 55)

2. Incapacity (22)
Case:
Murray v. Thompson
3. Illegality
Case:
Rodriguez v. Martinez
4. Forgery

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a. In general (23, 18)
Cases:
Gluckman v. Darling
Strader v. Haley
San Carlos Milling Co., v. Bank of the Phil. Islands
PNB v. Quimpo
b. Acceptance & payment under mistake
(1) When drawee accepts or pays forged instrument (62)
Cases:
Price v. Neal
First Natl. Bk of Portland v. U.S. Natl Bank of Portland
PNB v. Natl. City Bank of New York
PNB v. Court of Appeals
Republic of the Phil. V. Equitable Banking Corp.
Samsung v FEBTC, GR 129015, Aug 13, 2004
(2) Extension of Price v. Neal doctrine
(a) Over draft
Cases:
First Natl. Bk. Of Portland v. Noble
Liberty Trust v. Haggerty
(b) Stop payment order
(3) Effect of negligence of depositor
Case:
Ilusorio v CA, GR 139130, Nov 27, 2002
(4) Effect of payment under forged indorsements
Cases:
Great Eastern Life Ins. Co. v. Hongkong & Shanghai Bk
Jai Alai Corp. v. Bank of Phil. Is.
Canal Bank v. Bank of Albany
Republic Bank v. Ebrada
Banco de Oro v. Equitable Bkg. Corp.
Bank of P.I. v. CA
Gempesaw v. CA
PNB v CA 107612/Jan 31, 96
Westmont v Ong, GR 132560, Jan 30, 2002
Traders Royal Bank v. RPN, GR 138510, Oct 10, 2002
Allied Bank v. Lim Sio Wan, GR 1331789, Mar 27, 2008
Bank of America v. Phil Racing Club, GR 150228, July 30,
2009
MBTC v Junnel’s, GR 235511, Jun 20, 2018
Tolman v. American Natl. Bank
Snyder v. Corn Exchange Nat. Bk.
(5) Effect of negligence of drawee in informing recipient of forgery
Case:
Clearfield Trust Co. v. U.S.

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 (6) Effect of negligence of drawer in case of forged indorsements
on checks
Case:
Detroit Piston Ring v. Wayne Country & Home Savings Bank
PCIB v Court of Appeals, GR 121413, Jan 29, 2001
5. Material alteration
a. In general (124, 125)
Cases:
Montinola v. PNB
PNB v CA, GR 107508, Apr 25, 1996
Int’l Corp Bank v. CA, GR 129910, Sep 5, 2006
Westmont Bank v Dela Rosa-Ramos, GR 160260, Oct 24, 2012
Bank of Commerce of Sulphur v. Webster
b. Effect of negligence of drawer of checks
Cases:
Foutch v. Alexandria Bank & Trust Co.
Savings Bk. Of Richmond v. Natl. Bank
Critten v. Chemical Nat’l Bk.
c. Effect of drawee’s payment or acceptance of altered check
Cases:
Marine Natl. Bank v. Natl. City Bank
Wells Fargo Bk. V. Union Trust Co. v. Bank of Italy
Hongkong & Shanghai Bakg. Corp. v. People’s Bk. 7 Trust Co.
Republic Bk. V. CA & First National City Bk.
FEBTC v Gold Palace, GR 168274, Aug 20, 2008
Areza v Express Savings, GR 176697, Sep 10, 2014
6. Fraud
Cases:
C.T.I. Corp. v. Panac (App. Ct. decision)
C.T.I. Corp. v. Panac (Sup. Ct. decision)
7. Duress
8. Complete instrument which is undelivered (16)
Cases:
Cohn v. City of Taunton
Smith v. Dotterweich
RCBC v. Hi-Tri Dev’t Corp, GR 192413, Jun 13, 2012
9. Incomplete instrument which is undelivered (15)
Cases:
Pavilis v. Farmers’ Union
Weiner v. Pennsylvania Co.
Linick v. A.J. Nutting & Co.
Ching v, Nicdao, GR 141181, April 27, 2007
10. Incomplete instrument which has been delivered (14)
Case:
Simpson v. Natl. Bk. Of Roseburg

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 Dy v. People, GR 158312, Nov 14, 2008
11. Consideration (28)
Cases:
Patrimonio v. Gutierrez, GR 187769, Jun 4, 2014
Ty v. People, GR 149275, Sep 27, 2004
Sps. Violago v. BA Finance Corp., GR 158262, Jul 21, 2008
Cayanan v. Northstar, GR 172954, Oct 5, 2011
De Leon v. Rodriguez, GR 202658, Jun 17, 2019
Dougherty v. Salt
William Barco & Son v. Farbes

CHAPTER V
LIABILITY OF PARTIES

1. Liability of primary parties

a. In general (192, 70)
b. Liability of maker (60)
Case:
First Natl. Bk. Of Central City v. Utterback
c. Status of drawee prior to acceptance or payment; effect of stop order (127,
189)
Cases:
Araneta v. Bank of America
Woody v. Natl. Bk. Of Rocky Mount
Singson v. Bank of P.I.
China Banking Corp v Padilla, GR 202532, Oct 21, 2015
Speroff v. First Central Trust Co.
Chase Natl. Bk. Of NY v. Battat
d. Liability of acceptor (62)
2. Formal requisites of acceptance (191, 132, 133, 138)
Cases:
Lawless v. Temple
Kilgore Natl. Bank v. Moore Bros. Lumber Co.
a. Constructive acceptance (136, 137, 150)
Cases:
Wisner v. First Nat. Bk. Of Gallitzin
Urwiller v. Platee Valley State Bk.
Sumcad v. Province of Samar
3. Acceptance on a separate instrument (134, 135)
Case:
Coolidge v. Payson
4. Kinds of Acceptance
a. General acceptance (139, 140)
b. Qualified acceptance (141, 142)
(a) Conditional

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 (b) Partial
(c) Local
(d) As to time
(e) As to drawee
c. Trade acceptance
d. Banker’s acceptance
5. Checks (185, 63)
a. In general
Cases:
Republic v. PNB
Philippine Airlines v. CA
Cebu Int’l Finance Corp v CA, GR 123031, Oct 12, 1999
BPI v Sps Royeca, GR 176664, Jul 21, 2008
Evangelista v Screenex, GR 211564, Nov 20, 2017
Fortunado v. CA
Mesina v. Intermediate Appellate Court
BPI v. Roxas, GR 157833, Oct 15, 2007
RCBC Savings v. Odrada, GR 219037, Oct 19, 2016
b. Certification and its effects (187, 188, 189)
Cases:
New Pacific Timber v. Seneris
Wachtel v. Rosen
Roman Catholic Archibshop of Malolos Inc. v. IAC
Villanueva v. Nite, GR 148211, Jul 25, 2006
Miranda v. PDIC, GR 169334, Sep 8, 2006
EPCIB v. Ong, GR 156207, Sep 15, 2006
RCBC v. Hi-Tri Dev’t Corp, GR 192413, Jun 13, 2012
Bulliet v. Allegheny Trust Co.
Sutter v. Security Trust Co.
c. Distinction between surrender of check upon payment and negotiation
d. Clearing of checks
6. Liability of secondary parties (70)
a. Liability of drawer (61)
Cases:
PNB v. Picornell
Banco Atlantico v. Auditor General
McCornack v. Central State Bank
b. Criminal liability for bouncing checks
(1) Under B.P No. 22
(2) Estafa under the Revised Penal Code
Cases:
Lozano v. Martinez
People v. Nitafan
c. Liability of qualified indorser and one negotiating by delivery (65)
d. Liability of a general or unqualified indorser (66, 67, 63, 40)

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 Cases:
Nota Sapiera v. CA, GR 128927, Sep 14, 1999
Metrobank v. PBCOM, GR 141408 & 141429, Oct 18, 2007
Citibank v. Sabeniano, GR 156132, Oct 16, 2006
Adolph Ramish, Inc. v. Woodruff
BPI v CA, GR 112392, Feb 29, 2000
Wachovia Bank v. Crafton
Horowitz v. Wollowitz
e. Liability of restrict indorser
f. Order of liability among indorsers (68)
7. Liability of accommodation party (29, 63, 64)
Cases:
Ingalls v. Marston
West Rustland Trust v. Houston
Goodman v. Gaul
Clark v. Sellner
Lim v. Saban, GR 163720, Dec 16, 2004
Maulini v. Serrano
PNB v. Maza
Bautista v. Auto Plus, GR 166405, Aug 6, 2008
Nissan Gallery-Ortigas v. Felipe, GR 199067, Nov 11, 2013
Acuna v. Veloso
Ang Tiong v. Ting
Sadaya v. Sevilla
Agro Conglomerates v. CA, GR 117660, Dec 18, 2000
Ang v. Assoc Bank, GR 146511, Sep 5, 2007
Gonzales v. PCIB, GR 180257, Feb 23, 2011
Prudencio v. Court of Appeals
Aglibot v. Santia, GR 185945, Dec 5, 2012
8. Liability of an agent (19, 20, 21 and 69)
Cases:
Austin Nichols & Co. v. Gross
New Georgia Natl. Bank v. Lippmann
Pratt v. Hopper
Insular Drug Co. v. Phil. Natl. Bank
Phil. Bk. Of Commerce v. Aruego
9. Signature by trade name (18)
10. Presentment for acceptance
a. When necessary; effect of non-presentment (143, 144, 193)
b. How and when made (145, 146)
c. When excused (148, 147)
d. Dishonor and its effects (149, 150, 151, 89, 117)
11. Presentment for payment
a. When presentment necessary; effect of non-presentment (70)
b. When presentment not necessary

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 (1) As to drawer (79)
(2) As to indorser (80)
(3) As to all secondary parties (82, 151, 111)
c. Date and time of presentment of instrument bearing fixed maturity (71, 85, 86,
194)
d. Date of presentment of demand notes (71)
e. Date of presentment of demand bills of exchange
Case:
Columbian Banking v. Bowen
f. Date of presentment of checks (185, 186)
Cases:
Int’l Corp Bank v. Sps Gueco, GR 141968, Feb 12, 2001
Fick v. Jones
Gordon v. Levine
Morrison v. McCartney
PNB v. Seeto
Crystal v. Court of Appeals
g. When delay in presentment excused (81)
h. Manner of presentment (74)
i. What constitutes sufficient presentment (72)
(1) By whom
Crossed checks
Cases:
Chan Wan v. Tan Kim
Associated Bank v. CA
(2) Time of presentment [72 (b), 75]
(3) Place of presentment (73)
(4) To whom presentment must be made [72 (d), 76, 77, 78]
j. What constitutes dishonor by non-payment (83)
k. Effect of dishonor by non-payment (84)
12. Notice of dishonor
a. When necessary (89)
Case:
Gullas v. PNB
b. Form and contents of notice (95, 96)
c. Time within which notice must be given (102, 103, 104, 105, 106, 107, 113)
Cases:
State Bk. Of East Moline v. Standaert
Arterburn v. Wakefield
d. Place where notice must be given (108)
e. By whom notice may be given (90, 91)
f. To whom notice must be given
(1) If given by agent (94)
Case:
Simon v. People’s Bk. & Trust Co.

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 (2) To whom in general (97)
(3) If party is dead (98)
(4) To partners (99)
(5) To joint parties (100)
(6) To bankrupt (101)
g. In whose favor notice operates (92, 93)
h. When rule requiring notice not applied
(1) In general (112)
(2) When notice of non-acceptance already given (116)
(3) Waiver (109, 110)
Case:
People’s Natl. Bank of Ypsilanti v. Dicks
(4) When not necessary to charge drawer (114)
Case:
State Investment House v. CA
(5) When not necessary to charge indorser (115)
i. Legal effect of failure to give notice (89, 117)
Case:
Allied Bank v CA, GR 125851, Jul 11, 2006
13. Protest
a. Definition and method
b. When necessary (152, 129, 157)
Case:
Velasquez v. Solid Bank, GR 157309, Mar 28, 2008
Allied Banking v. CA, G.R. No. 125851, Jul 11, 2006
c. Forms and contents of certificate of protest (153)
d. Purpose of the certificate of protest
e. By whom made (154)
f. Time and place of protest (155, 156)
g. Protest for better security (158)
h. When delay is excused and protest is dispensed with (159, 112)
Cases:
Ellenbogen v. State Bank
Tan Leonco v. Go Inqui
i. Waiver of protest (111)
j. Protest in case of loss of instrument (160)
14. Acceptance for honor (161, 131)
15. Payment for honor (171)
16. Liability of party on indorsement after maturity
Case:
Bishop v. Dexter
17. Instruments payable at a bank (87)
Case:
Binghampton Pharmacy v First Natl. Bank
18. Bills in set (178, 179, 180, 181, 182, 183)

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19. Liability of transferors or assignors of negotiable instruments [Art. 1628 (Civil Code)]

CHAPTER VI
DISCHARGE

1. Discharge of the instrument (119)

a. By payment in due course (51, 88)
(1) Medium of payment
(2) By whom made
Case:
Fox v. Kroeger
(3) When check deemed paid by drawee bank
(4) To whom made
Cases:
Equitable Banking v. IAC
Cebu Int’l Finance Corp v. CA, GR 123031, Oct 12, 1999
In Re Harbaugh’s Estate
(5) At or after maturity
(6) In good faith and without notice
b. By intentional cancellation [119 (c) and Sec. 123]
Case:
Jones’ Adm’rs v. Coleman
c. By any other act which will discharge a contract
Case:
Papa v. Valencia, GR 105188, Jan 23, 1998
Evangelista v. Screenex, GR 211564, Nov. 20, 2017
Manchester v. Parsons
d. By reacquisition of principal debtor in his own right [119 (e)]
Case:
Sps. Abella v. Sps. Abella, GR 219534, Nov 25, 2019
Schwartzman v. Post
e. By renunciation of holder (122)
Case:
McGlynn v. Granstrom
f. Material alteration (124, 125)
2. Discharge of secondary parties (120)
a. By discharge of instrument
b. By intentional cancellation of signature(123, 48)
Case:
McCormick v. Shea
c. By discharge of prior party
Case:
Roberts v. Chapell
d. By valid tender of payment by prior party
Case:

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 Corley v. French
e. By release of principal debtor
f. By extension of time of payment [120 (f)]
Case:
Maglione v. Penta
g. By renunciation (122)
h. By taking a qualified acceptance (142)
i. By failure to make due presentment (70, 144)
j. By failure to give notice of dishonor (89)
k. Certification of check at instance of holder (188)
l. Effect of reacquisition by prior party (121, 50)

CHAPTER VII
OTHER FORMS OF COMMERCIAL PAPER

1. Certificate of deposit
2. Bonds and debentures
Cases:
Mercer County v Hackett
Manker v. American Savings Bank
Enoch v. Brandon
3. Drafts and Letters of Credit (Arts. 567-571, Code of Commerce)
Cases:
Gregorio Araneta, Inc. v. PNB
National Rice & Corn Corp. v. Pan-Philippines
Bank of P.I. v. De Reny Fabric Industries Shipping
4. Certificate of stock
Cases:
Santamaria v. Hongkong & Shanghai Banking Corp.
De los Santos v. McGrath
5. Negotiable Documents of Title
a. In general
b. Kinds and functions
c. Negotiation
d. Rights of holder
(1) When free from personal defenses (Arts. 1512, 1518 , Civil Code)
(2) What title acquired (Art. 1513, 1514, 1519, Civil Code)
e. Liability of indorser
Cases:
Roman v. Asia Banking Corp.
John S. Hale & Co., Inc. v. Beley Cotton Co.
Southern Pac. Co. v. Bank of America
W.S. Brown Mercantile Co. v. Yielding
Bros. Dept. Store, Inc.
Dunagan v. Griffin

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 Luhrs v. Valley Ranch Co.
Siy Cong Bieng & Co. v. Hongkong & Shanghai Bank

Grading System: Transmutation Table:

Recitation 40% 1.0 97-100 2.25 82-84

Final Exams 60% 1.25 94-96 2.5 79-81
1.5 91-93 2.75 76-78
1.75 88-90 3.0 75
2.0 85-87 5.0 <75

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