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12-SALAS Vs CA

Juanita Salas purchased a vehicle through a promissory note but defaulted on payments after discovering discrepancies in the vehicle details. She was sued by the financing corporation that had endorsed the note. The Regional Trial Court ordered Salas to pay but she appealed alleging fraud by the dealership. The Court of Appeals also ordered payment. The Supreme Court ruled the promissory note was a negotiable instrument as it met the requirements of writing, unconditional payment terms, and designation of drawee. As such, Salas could not use defenses against the financing corporation, only against the dealership. The financing corporation was a holder in due course not subject to Salas' claims of fraud by the dealership.

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Robelle Rizon
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181 views2 pages

12-SALAS Vs CA

Juanita Salas purchased a vehicle through a promissory note but defaulted on payments after discovering discrepancies in the vehicle details. She was sued by the financing corporation that had endorsed the note. The Regional Trial Court ordered Salas to pay but she appealed alleging fraud by the dealership. The Court of Appeals also ordered payment. The Supreme Court ruled the promissory note was a negotiable instrument as it met the requirements of writing, unconditional payment terms, and designation of drawee. As such, Salas could not use defenses against the financing corporation, only against the dealership. The financing corporation was a holder in due course not subject to Salas' claims of fraud by the dealership.

Uploaded by

Robelle Rizon
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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SALAS vs.

CA
FACTS: Records disclose that on February 6, 1980, Juanita Salas (petitioner) bought a
motor vehicle from the Violago Motor Sales Corporation (VMS for brevity) for
P58,138.20 as evidenced by a promissory note. This note was subsequently endorsed
to Filinvest Finance & Leasing Corporation (private respondent) which financed the
purchase. Salas defaulted in her installments beginning May 21, 1980 allegedly due to a
discrepancy in the engine and chassis numbers of the vehicle delivered to her and
those indicated in the sales invoice, certificate of registration and deed of chattel
mortgage, which fact she discovered when the vehicle figured in an accident on 9 May
1980. This failure to pay prompted private respondent to initiate Civil Case No. 5915 for
a sum of money against petitioner before the Regional Trial Court of San Fernando,
Pampanga. RTC ordered Salas to pay P28,414.40 plus 14% interest. CA ordered Salas
to pay P58,138.20 plus 14% interest. Petitioner assigns twelve (12) errors which focus
on the alleged fraud, bad faith and misrepresentation of Violago Motor Sales
Corporation in the conduct of its business and which fraud, bad faith and
misrepresentation supposedly released petitioner from any liability to private respondent
who should instead proceed against VMS.
P58,138.20
San Fernando, Pampanga, Philippines
Feb. 11, 1980

For value received, I/We jointly and severally, promise to pay Violago Motor Sales Corporation or order, at its office in
San Fernando, Pampanga, the sum of FIFTY EIGHT THOUSAND ONE HUNDRED THIRTY EIGHT & 201/100
ONLY (P58,138.20) Philippine currency, which amount includes interest at 14% per annum based on the diminishing
balance, the said principal sum, to be payable, without need of notice or demand, in installments of the amounts
following and at the dates hereinafter set forth, to wit: P1,614.95 monthly for "36" months due and payable on the
21st day of each month starting March 21, 1980 thru and inclusive of February 21, 1983. P_________ monthly for
______ months due and payable on the ______ day of each month starting _____198__ thru and inclusive of _____,
198________ provided that interest at 14% per annum shall be added on each unpaid installment from maturity
hereof until fully paid.

ISSUE: Whether the promissory note in question is a negotiable instrument which will
bar completely all the available defenses of the petitioner against private respondent.
RULING: Yes. A careful study of the questioned promissory note shows that it is a
negotiable instrument, having complied with the requisites under the law as follows: [a]
it is in writing and signed by the maker Juanita Salas; [b] it contains an unconditional
promise to pay the amount of P58,138.20; [c] it is payable at a fixed or determinable
future time which is "P1,614.95 monthly for 36 months due and payable on the 21 st day
of each month starting March 21, 1980 thru and inclusive of Feb. 21, 1983;" [d] it is
payable to Violago Motor Sales Corporation, or order and as such, [e] the drawee is
named or indicated with certainty. It was negotiated by indorsement in writing on the
instrument itself payable to the Order of Filinvest Finance and Leasing Corporation and
it is an indorsement of the entire instrument.
Among others, the instrument in order to be considered negotiable must contain
the so-called "words of negotiability — i.e., must be payable to "order" or
"bearer"". Under Section 8 of the Negotiable Instruments Law, there are only two
ways by which an instrument may be made payable to order. There must always
be a specified person named in the instrument and the bill or note is to be paid to
the person designated in the instrument or to any person to whom he has
indorsed and delivered the same. Without the words "or order or "to the order of",
the instrument is payable only to the person designated therein and is therefore
non-negotiable. Any subsequent purchaser thereof will not enjoy the advantages
of being a holder of a negotiable instrument, but will merely "step into the shoes"
of the person designated in the instrument and will thus be open to all defenses
available against the latter. Such being the situation in the above-cited case, it
was held that therein private respondent is not a holder in due course but a mere
assignee against whom all defenses available to the assignor may be raised.

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