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Caltex sued Security Bank to compel the bank to pay off the
CTDs. Security Bank argued that the CTDs are not negotiable
instruments even though the word bearer is written on their
face because the word bearer contained therein refer to
depositor and only the depositor can encash the CTDs and no
one else.
REGALADO, J.:
This petition for review on certiorari impugns and seeks the
reversal of the decision promulgated by respondent court on
March 8, 1991 in CA-G.R. CV No. 23615 1 affirming with
modifications, the earlier decision of the Regional Trial Court of
Manila, Branch XLII, 2 which dismissed the complaint filed
therein by herein petitioner against respondent bank.
The undisputed background of this case, as found by the court a
quo and adopted by respondent court, appears of record:
Atty. Calida:
If it were true that the CTDs were delivered as payment and not
as security, petitioner's credit manager could have easily said so,
instead of using the words "to guarantee" in the letter
aforequoted. Besides, when respondent bank, as defendant in the
court below, moved for a bill of particularity therein 17 praying,
among others, that petitioner, as plaintiff, be required to aver
with sufficient definiteness or particularity (a) the due date or
dates ofpayment of the alleged indebtedness of Angel de la Cruz
to plaintiff and (b) whether or not it issued a receipt showing that
the CTDs were delivered to it by De la Cruz as payment of the
latter's alleged indebtedness to it, plaintiff corporation opposed
the motion. 18 Had it produced the receipt prayed for, it could
have proved, if such truly was the fact, that the CTDs were
delivered as payment and not as security. Having opposed the
motion, petitioner now labors under the presumption that
evidence willfully suppressed would be adverse if produced. 19
Under the foregoing circumstances, this disquisition in
Intergrated Realty Corporation, et al. vs. Philippine National
Bank, et al. 20 is apropos:
. . . Adverting again to the Court's pronouncements in Lopez,
supra, we quote therefrom:
The character of the transaction between the parties is to be
determined by their intention, regardless of what language was
used or what the form of the transfer was. If it was intended to
secure the payment of money, it must be construed as a pledge;
but if there was some other intention, it is not a pledge.
However, even though a transfer, if regarded by itself, appears to
have been absolute, its object and character might still be
qualified and explained by contemporaneous writing declaring it
to have been a deposit of the property as collateral security. It
Art. 2096. A pledge shall not take effect against third persons if a
description of the thing pledged and the date of the pledge do not
appear in a public instrument.
Aside from the fact that the CTDs were only delivered but not
indorsed, the factual findings of respondent court quoted at the
start of this opinion show that petitioner failed to produce any
document evidencing any contract of pledge or guarantee
agreement between it and Angel de la Cruz. 25 Consequently, the
mere delivery of the CTDs did not legally vest in petitioner any
right effective against and binding upon respondent bank. The
requirement under Article 2096 aforementioned is not a mere
rule of adjective law prescribing the mode whereby proof may
be made of the date of a pledge contract, but a rule of
substantive law prescribing a condition without which the
execution of a pledge contract cannot affect third persons
adversely. 26
On the other hand, the assignment of the CTDs made by Angel
de la Cruz in favor of respondent bank was embodied in a public
instrument. 27 With regard to this other mode of transfer, the
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 72593 April 30, 1987
CONSOLIDATED PLYWOOD INDUSTRIES, INC.,
HENRY WEE, and RODOLFO T. VERGARA, petitioners,
vs.
IFC LEASING AND ACCEPTANCE CORPORATION,
respondent.
Carpio, Villaraza & Cruz Law Offices for petitioners.
Europa, Dacanay & Tolentino for respondent.
SO ORDERED.
With said assurance and warranty, and relying on the sellerassignor's skill and judgment, petitioner-corporation through
petitioners Wee and Vergara, president and vice- president,
respectively, agreed to purchase on installment said two (2) units
of "Used" Allis Crawler Tractors. It also paid the down payment
of Two Hundred Ten Thousand Pesos (P210,000.00).
In a decision dated April 20, 1981, the trial court rendered the
following judgment:
the
the
the
the
II
THAT THE LOWER COURT ERRED IN FINDING THAT
PLAINTIFF- APPELLEE IS A HOLDER IN DUE COURSE OF
THE PROMISSORY NOTE AND SUED UNDER SAID NOTE
AS HOLDER THEREOF IN DUE COURSE.
On July 17, 1985, the Intermediate Appellate Court issued the
challenged decision affirming in toto the decision of the trial
court. The pertinent portions of the decision are as follows:
xxx xxx xxx
From the evidence presented by the parties on the issue of
warranty, We are of the considered opinion that aside from the
fact that no provision of warranty appears or is provided in the
Deed of Sale of the tractors and even admitting that in a contract
of sale unless a contrary intention appears, there is an implied
warranty, the defense of breach of warranty, if there is any, as in
this case, does not lie in favor of the appellants and against the
plaintiff-appellee who is the assignee of the promissory note and
a holder of the same in due course. Warranty lies in this case
only between Industrial Products Marketing and Consolidated
Plywood Industries, Inc. The plaintiff-appellant herein upon
application by appellant corporation granted financing for the
purchase of the questioned units of Fiat-Allis Crawler,Tractors.
THE
I.
V.
II
THE RESPONDENT IS NOT A HOLDER IN DUE COURSE:
VI.
THE PROMISSORY NOTE CANNOT BE ADMITTED OR
USED IN EVIDENCE IN ANY COURT BECAUSE THE
REQUISITE DOCUMENTARY STAMPS HAVE NOT BEEN
AFFIXED THEREON OR CANCELLED.
ART. 1567. In the cases of articles 1561, 1562, 1564, 1565 and
1566, the vendee may elect between withdrawing from the
contract and demanding a proportionate reduction of the price,
with damages in either case. (Emphasis supplied)
Petitioner, having unilaterally and extrajudicially rescinded its
contract with the seller-assignor, necessarily can no longer sue
the seller-assignor except by way of counterclaim if the sellerassignor sues it because of the rescission.
In the case of the University of the Philippines v. De los Angeles
(35 SCRA 102) we held:
In other words, the party who deems the contract violated may
consider it resolved or rescinded, and act accordingly, without
previous court action, but it proceeds at its own risk. For it is
only the final judgment of the corresponding court that will
conclusively and finally settle whether the action taken was or
was not correct in law. But the law definitely does not require
that the contracting party who believes itself injured must first
file suit and wait for adjudgement before taking extrajudicial
steps to protect its interest. Otherwise, the party injured by the
other's breach will have to passively sit and watch its damages
accumulate during the pendency of the suit until the final
judgment of rescission is rendered when the law itself requires
that he should exercise due diligence to minimize its own
damages (Civil Code, Article 2203). (Emphasis supplied)
Going back to the core issue, we rule that the promissory note in
question is not a negotiable instrument.
ATTY. ILAGAN:
We stipulate it is one single transaction. (pp. 27-29, TSN.,
February 13, 1980).
ATTY. PALACA:
Did we get it right from the counsel that what is being assigned
is the Deed of Sale with Chattel Mortgage with the promissory
note which is as testified to by the witness was indorsed?
(Counsel for Plaintiff nodding his head.) Then we have no
further questions on cross,
COURT:
You confirm his manifestation? You are nodding your head? Do
you confirm that?
ATTY. ILAGAN:
The Deed of Sale cannot be assigned. A deed of sale is a
transaction between two persons; what is assigned are rights, the
rights of the mortgagee were assigned to the IFC Leasing &
Acceptance Corporation.
COURT:
He puts it in a simple way as one-deed of sale and chattel
mortgage were assigned; . . . you want to make a distinction, one
is an assignment of mortgage right and the other one is
indorsement of the promissory note. What counsel for
defendants wants is that you stipulate that it is contained in one
single transaction?
HELD:
CONSOLIDATED PLYWOOD V. IFC
149 SCRA 448
FACTS:
Petitioner bought from Atlantic Gulf and Pacific Company,
through its sister company Industrial Products Marketing, two
used tractors. Petitioner was issued a sales invoice for the
two used tractors. At the same time, the deed of sale with
chattel mortgage with promissory note was issued.
4
IPM inspected the job site and assured that the tractors were
fit for the job and gave a 90-days performance warranty of
the machines and availability of parts.
1
It paid the down payment of P210,000
reconditioning cost
12 IPM didn't do anything
6
IPM, by means of a deed of assignment, assigned its rights
and interest in the chattelmortgage in favor of IFC Leasing
and Acceptance Corp. (IFC)
would have given a lower price for it; but said vendor shall not
be answerable for patent defects or those which may be visible,
or for those which are not visible if the vendee is an expert who,
by reason of his trade or profession, should have known them.
1
assuming the note is negotiable
1
Consolidated's defenses may not prevail against it.
24
SEC. 8. WHEN PAYABLE TO ORDER. - The instrument is
payable to order where it is drawn payable to the order of a
specified person or to him or his order. . . .
25 Without the words "or order" or"to the order of, "the
instrument is payable only to the person designated therein
and is therefore non-negotiable.
FIRST DIVISION
[G.R. No. 154127. December 8, 2003]
ROMEO C. GARCIA,
LLAMAS, respondent.
petitioner, vs.
DIONISIO
V.
DECISION
The Antecedents
PANGANIBAN, J.:
Jesus].
Resisting the complaint, [Petitioner Garcia,] in his [Answer,]
averred that he assumed no liability under the promissory note
because he signed it merely as an accommodation party for x x x
de Jesus; and, alternatively, that he is relieved from any liability
arising from the note inasmuch as the loan had been paid by x x
x de Jesus by means of a check dated 17 April 1997; and that, in
any event, the issuance of the check and [respondents]
acceptance thereof novated or superseded the note.
[Respondent] tendered a reply to [Petitioner] Garcias answer,
thereunder asserting that the loan remained unpaid for the reason
that the check issued by x x x de Jesus bounced, and that
[Petitioner] Garcias answer was not even accompanied by a
certificate of non-forum shopping. Annexed to the reply were the
face of the check and the reverse side thereof.
For his part, x x x de Jesus asserted in his [A]nswer with
[C]ounterclaim that out of the supposed P400,000.00 loan, he
received only P360,000.00, the P40,000.00 having been advance
interest thereon for two months, that is, for January and February
1997; that[,] in fact[,] he paid the sum of P120,000.00 by way of
interests; that this was made when [respondents] daughter, one
Nits Llamas-Quijencio, received from the Central Police District
Command at Bicutan, Taguig, Metro Manila (where x x x de
Jesus worked), the sum of P40,000.00, representing the peso
equivalent of his accumulated leave credits, anotherP40,000.00
as advance interest, and still another P40,000.00 as interest for
the months of March and April 1997; that he had difficulty in
paying the loan and had asked [respondent] for an extension of
time; that [respondent] acted in bad faith in instituting the case,
[respondent] having agreed to accept the benefits he (de Jesus)
Petitioner
consideration:
The CA ruled that the trial court had erred when it rendered
a judgment on the pleadings against De Jesus. According to the
appellate court, his Answer raised genuinely contentious issues.
Moreover, he was still required to present his evidence ex parte.
Thus, respondent was not ipso facto entitled to the RTC
judgment, even though De Jesus had been declared in default.
The case against the latter was therefore remanded by the CA to
the trial court for the ex parte reception of the formers evidence.
submits
the
following
issues
for
our
II
First Issue:
Novation
III
Whether or not judgment on the pleadings or summary judgment
was properly availed of by Respondent Llamas, despite the fact
that there are genuine issues of fact, which the Honorable Court
of Appeals itself admitted in its Decision, which call for the
presentation of evidence in a full-blown trial.[8]
Simply put, the issues are the following: 1) whether there
was novation of the obligation; 2) whether the defense that
petitioner was only an accommodation party had any basis; and
3) whether the judgment against him -- be it a judgment on the
that the present respondent has done away with his right to exact
fulfillment from either of the solidary debtors.[25]
Second Issue:
Accommodation Party
Petitioner avers that he signed the promissory note merely
as an accommodation party; and that, as such, he was released as
obligor when respondent agreed to extend the term of the
obligation.
This reasoning is misplaced, because the note herein is not a
negotiable instrument. The note reads:
PROMISSORY NOTE
P400,000.00
RECEIVED FROM ATTY. DIONISIO V. LLAMAS, the sum of
FOUR HUNDRED THOUSAND PESOS, Philippine Currency
payable on or before January 23, 1997 at No. 144 K-10 St.
Kamias, QuezonCity, with interest at the rate of 5% per month or
fraction thereof.
It is understood that our liability under this loan is jointly and
severally [sic].
Done at Quezon City, Metro Manila this 23 rd day of December,
1996.[30]
By its terms, the note was made payable to a specific person
rather than to bearer or to order[31] -- a requisite for negotiability
under Act 2031, the Negotiable Instruments Law (NIL).Hence,
petitioner cannot avail himself of the NILs provisions on the
liabilities and defenses of an accommodation party. Besides, a
non-negotiable note is merely a simple contract in writing and is
evidence of such intangible rights as may have been created by
the assent of the parties.[32] The promissory note is thus covered
by the general provisions of the Civil Code, not by the NIL.
Even granting arguendo that the NIL was applicable, still,
petitioner would be liable for the promissory note. Under Article
29 of Act 2031, an accommodation party is liable for the
instrument to a holder for value even if, at the time of its taking,
the latter knew the former to be only an accommodation party.
The relation between an accommodation party and the party
accommodated is, in effect, one of principal and surety -- the
accommodation party being the surety.[33] It is a settled rule that a
surety is bound equally and absolutely with the principal and is
SO ORDERED.
Davide, Jr., C.J., (Chairman), Ynares-Santiago, Carpio, and
Azcuna, JJ., concur.
CA: no novation