Sps. Pedro and Florencia Violago vs. BA Finance Corp. and Avelino Violago Topic: Elements of Negotiable Instrument
Pedro and Florencia Violago (Spouses) Petitioners: Finance) and Avelino Violago Respondents: BA Finance Corp. (BA Finance)
(Avelino) DOCTRINE: DOCTRINE: For an instrument to be considered as a negotiable instrument, all the all the following requisites must be complied with: (a) It must be in writing and igned by the maker or drawer; (b) Must contain an unconditional promise or order to pay a sum certain in money; (c) Must be payable on demand, or at a fixed or determinable future time; (d) Must be payable to order or to bearer; and (e) Where the instrument is addressed to a drawee, he must be named or otherwise indicated therein with reasonable certainty. FACTS
Avelino, president of Violago Motor Sales Corp. (VMSC) offered to sell a Toyota Cressida Model 1983 car to his cousin, Pedro Violago and wife Florencia. o Downpayment is only 60,500 with balance to be finances by BA Finance. Upon agreeing to purchase the car, the spouses and Avelino signed a promissory note (PN) binding themselves to pay jointly and severally to the order of VMSC the remaining balance in 36 monthly installments. o VMSC issued sales invoice in favor of spouses and the spouses executed chattel mortgage (CM) over the car in favor of VMSC. o 60,500 remitted to VMSC. VMSC endorsed the PN to BA Finance without recourse. o After receiving the full payment from VMSC, it executed a Deed of Assignment over the PN and CM in favor of BA Finance. Unaware of the prior sale of the same car to Esmeraldo VIolago, another cousin of Avelino (car registered in LTO San Rafael), the spouses filed the sales invoice with the LTO which later on issued the Cert. of Registration in the name of Pedro.
While the case was on-going, Esmeraldo conveyed the car to Jose Olvido who executed a CM over the vehicle in favor of one Generoso Lopez as security for loan. o The PN was later on endorsed to BA Finance. Despite demands, there was no delivery of the vehicle. Accordingly, the spouses did not pay the monthly amortization to BA Finance. BA Finance filed a complaint for Replevin with damages against the spouses praying for the delivery of the vehicle to BA Finance, or payment of the financed amount. o RTC issued an order of replevin. It eventually ruled in favor of BA Finance. After RTC denied the MR and Motion to Quash Writ o of Execution due to lack of service of summons, the spouses filed a petition for certiorari Spouses filed their answer: o Never received the vehicle o Vehicle previously sold to Esmeraldo BA Finance was not a holder in due course o o Recourse of BA Finance should be against VMSC Spouses also filed a 3 rd party complaint against Avelino praying that he be held liable in case they be held liable to BA Finance. o
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Avelino’s MTD was denied.
RTC: Spouses should deliver the car to AB Finance or in the alternative, to pay BA Finance jointly and severally, but the spouses are entitled to be indemnified by Avelino. Upon appeal to CA, spouses argued that: o PN is negotiable instrument thus NIL should be applied (not Civil Code) o Since VMSC was not the owner of the car at the time of the sale, such sale was null and void for failure in the cause or consideration of the PN. o BA Finance is not a holder in due course since it knew that the car was never delivered to the spouses. CA’s decision:
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PN was a negotiable instrument and that BA Finance was a holder in due course (NIL, Sec.8, 24, 52). Spouses should have impleaded VMSC (seller of the car and creditor in PN). Since VMSC is an indispensable party, any judgment will not bind it or be enforced against it. Avelino is liable for damages to the spouses without prejudice to the action of the spouses against VMSC and Avelino in a separate action. Third party complaint against the spouses is dismissed.
ISSUE WON the PN is a negotiable instrument HELD: YES. PN is clearly negotiable, all the requisites of a negotiable instrument are present. CA’s decision is set aside insofar as it dismissed without prejudice the 3 rd party complaint of spouses against Violago. Requisites of a Negotiable Instrument: Section 1. Form of Negotiable Instruments. An instrument to be negotiable must conform to the following requirements: (a) It must be in writing and signed by the maker or drawer; (b) Must contain an unconditional promise or order to pay a sum certain in money; (c) Must be payable on demand, or at a fixed or determinable future time; (d) Must be payable to order or to bearer; and (e) Where the instrument is addressed to a drawee, he must be named or otherwise indicated therein with reasonable certainty. The PN clearly satisfies the requirements of a NI under the NIL. It is in writing and signed by the Violago spouses o o Has an unconditional promise to pay a certain amount o On specific dates in the future which could be determined from the terms of the note o Made payable to the order of VMSC
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Names the drawees with certainty. The indorsement by VMSC to BA Finance appears likewise to be valid and regular.
