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    GSIS vs. CA, G.R. No. L-40824 February 23, 1989

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    Calma, Anwar, G.
    Commercial Law I

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    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd

    GSIS vs. CA, G.R. No. L-40824 February 23, 1989

    Uploaded by

    Calma, Anwar, G.
    8 views2 pages
    Commercial Law I

    Copyright

    © © All Rights Reserved

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    DOCX, PDF, TXT or read online from Scribd

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    Commercial Law I

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    8 views2 pages

    GSIS vs. CA, G.R. No. L-40824 February 23, 1989

    Uploaded by

    Calma, Anwar, G.
    Commercial Law I

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    of 2

    “When the time is right, I, the Lord, will make it happen.

    ”
    GOVERNMENT SERVICE INSURANCE SYSTEM, petitioner,
    vs.
    COURT OF APPEALS and MR. & MRS. ISABELO R. RACHO,
    respondents.
    G.R. No. L-40824; February 23, 1989

    Facts:

    Private respondents, Mr. and Mrs. Isabelo R. Racho, together with the spouses Mr.
    and Mrs Flaviano Lagasca, executed a deed of mortgage in favor of petitioner
    Government Service Insurance System. They also executed a 'promissory note.
    On July 11, 1961, the Lagasca spouses executed an instrument denominated
    "Assumption of Mortgage" under which they obligated themselves to assume the
    aforesaid obligation to the GSIS and to secure the release of the mortgage covering
    that portion of the land belonging to herein private respondents and which was
    mortgaged to the GSIS. 4 This undertaking was not fulfilled. Upon failure of the
    mortgagors to comply with the conditions of the mortgage, particularly the
    payment of the amortizations due, GSIS extrajudicially foreclosed the mortgage
    and caused the mortgaged property to be sold at public auction.
    More than two years thereafter, herein private respondents filed a complaint
    against the petitioner and the Lagasca spouses in the former CFI of Quezon City,
    praying that the extrajudicial foreclosure "made on, their property and all other
    documents executed in relation thereto in favor of the Government Service
    Insurance System" be declared null and void. It was further prayed that they be
    allowed to recover said property, and/or the GSIS be ordered to pay them the value
    thereof, and/or they be allowed to repurchase the land. Additionally, they asked for
    actual and moral damages and attorney's fees.
    In their aforesaid complaint, private respondents alleged that they signed the
    mortgage contracts not as sureties or guarantors for the Lagasca spouses 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 rendered judgment dismissing
    the complaint for failure to establish a cause of action. Said decision was reversed
    by the respondent Court of Appeals.
    Issues:

    WON the executed promissory note is a negotiable instrument?

    Ruling: NO.

    In submitting their case to this Court, both parties relied on the provisions of
    Section 29 of Act No. 2031, otherwise known as the Negotiable Instruments Law,
    which provide 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.

    This approach of both parties appears to be misdirected and their reliance


    misplaced. The promissory note hereinbefore quoted, as well as the mortgage
    deeds subject of this case, are clearly not negotiable instruments. These documents
    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.

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