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NEGOTIABLE INSTRUMENTS CHUA, JULIE VIRA D. Co"ce t o# Ne$ot!ab%e I"&t'ume"t& GOVERNMENT SERVICE INSURANCE S)STEM *&. COURT O+ A,,EALS a"- MR. . MRS. ISABELO R. RACHO G.R. No. L/01230 +eb'ua'4 35, 6727

+act&: ,'!*ate 'e& o"-e"t&, M'. a"- M'&. I&abe%o R. Rac(o, to$et(e' 8!t( t(e & ou&e& M'. a"M'& +%a*!a"o La$a&ca, e9ecute- a -ee- o# mo't$a$e, -ate- No*embe' 65, 67:; !" #a*o' o# et!t!o"e' Go*e'"me"t Se'*!ce I"&u'a"ce S4&tem <GSIS= a"- &ub&e>ue"t%4, a"ot(e' -ee- o# mo't$a$e, -ate- A '!% 60, 67:2 !" co""ect!o" 8!t( t8o %oa"& $'a"te- b4 t(e %atte' !" t(e &um& o# , 66,:11.11 a"- , 5,111.11, 'e& ect!*e%4. A a'ce% o# %a"- co/o8"e- b4 &a!- mo't$a$o' & ou&e&, 8a& $!*e" a& &ecu'!t4 u"-e' t(e a#o'e&a!- t8o -ee-&. T(e4 a%&o e9ecute- a ? 'om!&&o'4 "ote? 8(!c( &tate- t(at t(e4 @JOINTL), SEVERALL) a"- SOLIDARIL), 'om!&e to a4 t(e GOVERNMENT SERVICE INSURANCE S)STEMA t(e &a!- amou"t&. On July 11, 1961, the Lagasca spouses executed an instrument denominated "Assumption of Mortgage" under which they o ligated themsel!es to assume the aforesaid o ligation to the "#$# and to secure the release of the mortgage co!ering that portion of the land elonging to pri!ate respondents and which was mortgaged to the "#$#% &his underta'ing was not fulfilled% (pon failure of the mortgagors to comply with the conditions of the mortgage, particularly the payment of the amorti)ations due, "#$# extra*udicially foreclosed the mortgage and caused the mortgaged property to e sold at pu lic auction on +ecem er ,, 196-% More than two years thereafter, pri!ate respondents filed a complaint against the petitioner and the Lagasca spouses in the former .ourt of /irst $nstance of 0ue)on .ity, praying that the extra*udicial foreclosure "made on, their property and all other documents executed in relation thereto in fa!or of the "o!ernment #er!ice $nsurance #ystem" e declared null and !oid% $t was further prayed that they e allowed to reco!er said property, and1or the "#$# e ordered to pay them the !alue thereof, and1or they e allowed to repurchase the land% &hey alleged that they signed the mortgage contracts not as sureties or guarantors for the Lagasca spouses ut they merely ga!e their common property to the said co2 owners who were solely enefited y the loans from the "#$#% &he trial court rendered *udgment on /e ruary -3, 1964 dismissing the complaint for failure to esta lish a cause of action% #aid decision was re!ersed y the respondent .ourt of Appeals% I&&ue: B(et(e' o' "ot t(e 'om!&&o'4 "ote a"- mo't$a$e -ee-& a'e "e$ot!ab%e. Ru%!"$: A NO. Ju-$me"t !& 'e"-e'e- REVERSING t(e -ec!&!o" o# t(e 'e& o"-e"t Cou't o# ea%& a"- REINSTATING t(e -ec!&!o" o# t(e cou't a quo !" C!*!% Ca&e No. C/7062 t(e'eo#. $n su mitting their case, oth parties relied on the pro!isions of #ection -9 of Act 5o% -6,1,

otherwise 'nown as the 5egotia le $nstruments Law, which pro!ide that an accommodation party is one who has signed an instrument as maker, drawer, acceptor of indorser without receiving value therefor, but is held liable on the instrument to a holder for value although the latter knew him to be only an accommodation party % &his approach of oth parties appears to e misdirected and their reliance misplaced% &he promissory note herein efore 7uoted, as well as the mortgage deeds su *ect of this case, are clearly not negotia le instruments% &hese documents do not comply with the fourth re7uisite to e considered as such under #ection 1 of Act 5o% -6,1 ecause they are neither paya le to order nor to earer% &he note is paya le to a specified party, the "#$#% A sent the aforesaid re7uisite, the pro!isions of Act 5o% -6,1 would not apply8 go!ernance shall e afforded, instead, y the pro!isions of the .i!il .ode and special laws on mortgages%