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Salas v CA & FIlinvest

 Salas bought a motor vehicle with promissory note from Violago Motor Sales Corp: P58,138
 Endorsed to fIlinvest finance and leasing corp
 Salas defaulted because VMS delivered a different vehicle
 Filinvest filed a collection suit

TRIAL COURT= salas
 Ordered Salas to pay Filinvest 28,414

CA = salas

 Salas did not implead VMS because already filed another case for breach of contract with
damages
 Modified decision; Salas still to pay Filinvest: 54, 000 remaning bal deducting her two payments
before Salas defaulted

Salas contends:

 Fraud, misrepresentation, bad faith on VMS which absolved Salas from responsibiltiy. Filinvest
should proceed against VMS
 Stating law on sales by description, noc contract existed between Salas and VMS. VMS thereby
none has been assigned to FIlinvest

ISSSUE

Whether or not the promissory note is a negotiable instrument which will bar completely all the
available defenses of the petitioner against private respondent.

HELD: SC AFFIRMED CA’s DECISION

 YES. Negotiable. Promissory note bears all the earmarks of negotiability


 Complied with Sec 1 :
 SEC 8: words of negotiability” PAYABLE TO VIOLAGO “OR ORDER”
 Filinvest a holder in due course. Holds it free from any defect of title of prior parties abd free
from defenses available to prior parties among themselves AND MAY ENFORCE PAYMENT FOR
THE INSTRUMENT FOR THE FULL AMOUNT
 This being so, petitioner cannot set up against respondent the defense of nullity of the contract
of sale between her and VMS
 With regard to the breach of contract: cannot be decided before the court since VMS not
impleaded: to decide constitute denial of due process: improper, unconstitutional
CONSOLIDATED PLYWOOD V IFC

 Consolidated Plywood Industriies (CPII) engaged in logging, needed 2 tractors


 Atlactinc Gulf & Pacific Company thru sister Industrial Products Marketing (IPM) dealing with
tractors and heavy equipments, offered to sell
 IPM assured fitness of tractors, gave 90 day warranty
 CPII thru its pres Wee and vice pres Vergara purchases; paid downayment; sales invoice issued
together with the deed of sale with chattel mortgage with promissory note
 Simultaneously with theexecution of the deed of sale with chattel mortgage with promissory
note,the seller assignor, by means of a deed of assignment (E exh. " 1 "), assigned its rights and
interest in the chattel mortgage in favor of IFC
 After 14 days, 1 broke down, 9 days, the other one
 Vergara advisesd IPM payments would be delayed until IPM fulfills its condition under the
warranty
 IFC sued CPII, Vergara and Wee for principal sum

TRIAL COURT = IFC

 Ordered CPII et al, joint and severally to pay IFC principal sum, interests, costs, attorneys

CA = IFC

 Affirmed in toto
 No warranty in the deed of sale: Admitting there is implied warranty, said warranty does not lie
in favor of CPII as against IFC since warranty lies only between CPII and IPM
 A NEGOTIABLE INSTRUMENT: said is legally enforceable against CPII et al

CPII contends before SC:

 Clearly non negotiable since NOT PAYABLE TO ORDER OR TO BEARER


 IFC not a holder in due course: mere assignee hence CPI may raise against IFC all defenses
available against IPM
 CPI not liable for the promissory note IPM’s breach pf warranty, IFC may recover only from IPM

ISSUE

Whether the promissory note in question is negotiable

HELD: SC ANNULED AND SET ASIDE. COMPLAINT AGAINST CPII ET AL DISMISSED.

 NO. The pertinent portion of the note provides that “”FOR VALUE RECEIVED, I/we jointly and
severally promise to pay to the INDUSTRIAL PRODUCTS MARKETING
 Sec 1 provides/requires that it must be payable to order or to bearer
 IFC Leasing can never be a holder in due course but remains a mere assignee of the note:
records show IFC thru counsel admitted to being a mere assignee
 CPII may raise against IFC Leasing all defenses available to it as against IPM
 No need to implead IPM sinces defenses apply to both or either of them
 Assuming arguendo it’s negotiable, IFC not a holder in due course’ guilty of bad faith
 WARRANTY: there is breach of warranty: several provisions of Civil Code
 RESCISSION: CPI unilaterally rescinded contract: cannot sue IPM except by way of counterclaim
if IPM sues CPI because of rescission
PECO v SORIANO

 Montinola purchased 10 money orders from Manila Post Office


 Offered to pay with check: private checks not generally accepted in payment of MOs
 Teller advised to see Money Order Division; managed to leave with the MOs w/out knowledge
of teller
 SAME DAY: notice to postmasters, NEXT DAY; notice to banks; not to pay if presented with such
 Bank of America received notice 3 DAYS LATER
 1 Money order received by PECO: deposited w/ bank; cleared with Bureau of Posts; received
face value 200
 Bank of America informed that the MO was irregularly issued; deducted said amt from Bank of
America; Bank of America in turn debited PECO’s account

MUNICIPAL COURT OF MANILA = in favor of PECO

COURT OF FIRST INSTANCE = dismissed

ISSUE: Whether the postal money order is negotiable

HELD: SC AFFIRMED.

 NO. Our postal statutes were patterned after the postal statues of US: postal money orders are
not negotiable
 In establishing postal money order ystem, the govt is not engaged in commercial transactions
 Restrictions imposed upon money order by postal laws and regulations are inconsistent with the
charcter of negotiability, ex. Usually provide for not more than one endorsement
EQUITABLE BANKING v IAC

 Casals a srockholder of Casville Enterp.


 Bought two bulldozers from Nell Company.
 Opened a letter of credit with Equitable Banking Corp in lieu of cash payment
 Casville advised Nell that in order to open a LOC, Casville needs to deposit 427,000; Cascille is
short, Nell agreed to pay.
 sent a check” Pay to EBC order a/c of casville” drawn against National City Bank to Casville so
that the latter could send it to bank
 Casals went to bank’ teller applied the amt to Casville’s account; ;instead of depositing it in lieu
of the letter of credit;
 Casals, acting in behalf of Casville, withdrew all amt and appropriated for himself
 Nell filed an action after knowing that no letter od credit was opened by the bank and the amt
was withdrawn by Casville

TRIAL COURT: in favor of Nell

 Ordered Casville and Casals and EBC to pay jointly and severally the amt of the check,
 Ordered EBC to pay attorneys fees
 EBC liable for mistake of its employees; check was payable only to the defendant and no one
else; addition of words “A/C Casville merely indicated for whose or in connection with what
account the check was issued

CA = affirmed in toto

ISSUE: Whether EBC is liable to cover the loss

HELD: SC = DISAGREED. Petition filed by Equitable bank GRANTED. CA’s decision SET ASIDE. Against Nell

NO.

 Check was patently equivocal and ambiguous;


 Payee ceased to be indicated with reasonable certainty in contravention of Sec 8
 Ambiguity to be construed against Nell who caused the ambiguity
 Art 1377: interpretation of obscure words shall not favor the party who caused it
 it was NELL's own acts, which put it into the power of Casals and Casville to perpetuate the
fraud against it and, consequently, it must bear the loss
 As between two innocent persons, one of whom must suffer the consequence of a breach of
trust, the one who made it possible by his act of confidence must bear the loss
PNB v RODRIGUEZ & RODRIGUEZ

 Spouses rodriguez clients maintaines a savings and checking account with pnb
 Engaged in informal lending business

RTC = in favor of spouses

CA = affirmed

 Pnb contends/ principal ground that the checks should be considered as payable to bearer and
not to order

ISSUE

Whether the checks are payable to order or to bearer and who bears the loss

HELD: ORDER

 Rule, when the payee is fictitious… the check is bearer Sec 9, c



ANG TEK LIAN V CA

 Ang Tek drew a check upon China Banking Corp “payable to order of cash”
 Knew he had no funds therefor
 To Lee Hua Hong in exchange for money
 Next day, presented before the bak; dishonored; insufficiency of funds

CA =