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GSIS v. CA

Spouses Racho and Spouses Lagasca took out loans from GSIS, with land owned by both couples used as collateral. Spouses Lagasca later assumed the mortgage obligation to have the land of Spouses Racho released. When payments were not made, GSIS foreclosed on the property. Spouses Racho then sued to have the foreclosure declared void, arguing they were accommodation parties, not guarantors. The trial court dismissed the case while the Court of Appeals reversed. The Supreme Court then reinstated the trial court's decision, finding the promissory note and mortgage deeds were not negotiable instruments as defined by law and the provisions of the Civil Code and mortgage laws applied instead

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Lloyd David P. Vicedo
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63 views2 pages

GSIS v. CA

Spouses Racho and Spouses Lagasca took out loans from GSIS, with land owned by both couples used as collateral. Spouses Lagasca later assumed the mortgage obligation to have the land of Spouses Racho released. When payments were not made, GSIS foreclosed on the property. Spouses Racho then sued to have the foreclosure declared void, arguing they were accommodation parties, not guarantors. The trial court dismissed the case while the Court of Appeals reversed. The Supreme Court then reinstated the trial court's decision, finding the promissory note and mortgage deeds were not negotiable instruments as defined by law and the provisions of the Civil Code and mortgage laws applied instead

Uploaded by

Lloyd David P. Vicedo
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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G.R. No.

L-40824 February 23, 1989


GOVERNMENT SERVICE INSURANCE SYSTEM, petitioner,
vs.
COURT OF APPEALS and MR. & MRS. ISABELO R. RACHO, respondents.
REGALADO, J.
FACTS:
Spouses Racho and Spouses Lagasca executed a deed of mortgage in favor of GSIS
for the loans granted by GSIS. A parcel of land co-owned by the mortgagor spouses
was given as security under the deeds. They also executed a promissory note
promising to pay the said amounts to GSIS. Later, Spouses Lagasca executed an
instrument assuming the mortgage obligation themselves and to secure the release of
the mortgage which also covers the land of Spouses Racho.
Because of failure to pay amortizations due, GSIS foreclosed the mortgage and caused
the mortgaged property to be sold at public auction.
More than two years later, Spouses Racho filed a complaint against GSIS and Spouses
Lagasca praying that the extrajudicial foreclosure be declared null and void. They allege
that they signed the mortgage contracts not as sureties or guarantors for Spouses
Lagasca but they merely gave their common property to the said co-owners who were
solely benefited by the loans from the GSIS.
The trial court dismissed the complaint for failure to establish a cause of action. The CA,
however, reverse the decisions stating that although formally they are co-mortgagors,
they are so as an accommodation party.
ISSUE:
Whether the promissory note, as well as the mortgage deeds are negotiable
instruments.
HELD:
No. The promissory note and the mortgage deeds are clearly not negotiable
instruments.
The approach and reliance of both parties with the provisions of Sec. 29 of NIL appears
to be misdirected and misplaced. Sec. 29 of NIL provides 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.
These documents, however, do not comply with the fourth requisite to be considered as
such under Section 1 of Act No. 2031 because they are neither payable to order nor to
bearer. The note is payable to a specified party, the GSIS. Absent the aforesaid
requisite, the provisions of Act No. 2031 would not apply; governance shall be afforded,
instead, by the provisions of the Civil Code and special laws on mortgages.
Judgment of CA is REVERSED. Decision of the trial court is REINSTATED.

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