G.R. No.
76788 January 22, 1990 WHEREFORE, and in view of all the foregoing,
JUANITA SALAS, petitioner,
vs.
HON. COURT OF APPEALS and FIRST FINANCE
& LEASING CORPORATION, respondents.
Arsenio C. Villalon, Jr. for petitioner.
Labaguis, Loyola, Angara & Associates for private
respondent.
FERNAN, C.J.:
Assailed in this petition for review on certiorari is
the decision of the Court of Appeals in C.A.-G.R.
CV No. 00757 entitled "Filinvest Finance & Leasing
Corporation v. Salas", which modified the decision
of the Regional Trial Court of San Fernando,
Pampanga in Civil Case No. 5915, a collection suit
between the same parties.
Records disclose that on February 6, 1980, Juanita
Salas (hereinafter referred to as 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 (hereinafter referred to as
private respondent) which financed the purchase.
Petitioner 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.
In its decision dated September 10, 1982, the trial
court held, thus:
A perusal of the evidence shows that the amount of
judgment is hereby rendered ordering the defendant
to pay the plaintiff the sum of P28,414.40 with
interest thereon at the rate of 14% from October 2,
1980 until the said sum is fully paid; and the further
amount of P1,000.00 as attorney's fees.
The counterclaim of defendant is dismissed.
With costs against defendant. 1
Both petitioner and private respondent appealed the
aforesaid decision to the Court of Appeals.
Imputing fraud, bad faith and misrepresentation
against VMS for having delivered a different vehicle
to petitioner, the latter prayed for a reversal of the
trial court's decision so that she may be absolved
from the obligation under the contract.
On October 27, 1986, the Court of Appeals rendered
its assailed decision, the pertinent portion of which is
quoted hereunder:
The allegations, statements, or admissions contained
in a pleading are conclusive as against the pleader. A
party cannot subsequently take a position
contradictory of, or inconsistent with his pleadings
(Cunanan vs. Amparo, 80 Phil. 227). Admissions
made by the parties in the pleadings, or in the course
of the trial or other proceedings, do not require proof
and cannot be contradicted unless previously shown
to have been made through palpable mistake (Sec. 2,
Rule 129, Revised Rules of Court; Sta. Ana vs.
Maliwat, L-23023, Aug. 31, 1968, 24 SCRA 1018).
When an action or defense is founded upon a written
instrument, copied in or attached to the
corresponding pleading as provided in the preceding
section, the genuineness and due execution of the
instrument shall be deemed admitted unless the
adverse party, under oath, specifically denied them,
and sets forth what he claims to be the facts (Sec. 8,
Rule 8, Revised Rules of Court; Hibbered vs. Rohde
and McMillian, 32 Phil. 476).
P58,138.20 stated in the promissory note is the
amount assumed by the plaintiff in financing the
purchase of defendant's motor vehicle from the
Violago Motor Sales Corp., the monthly
amortization of winch is Pl,614.95 for 36 months.
Considering that the defendant was able to pay twice
(as admitted by the plaintiff, defendant's account
became delinquent only beginning May, 1980) or in
the total sum of P3,229.90, she is therefore liable to
pay the remaining balance of P54,908.30 at l4% per
annum from October 2, 1980 until full payment.
WHEREFORE, considering the foregoing, the
appealed decision is hereby modified ordering the
defendant to pay the plaintiff the sum of P54,908.30
at 14% per annum from October 2, 1980 until full
payment. The decision is AFFIRMED in all other
respects. With costs to defendant. 2
Petitioner's motion for reconsideration was denied;
hence, the present recourse.
In the petition before us, 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. 3
Petitioner argues that in the light of the provision of
the law on sales by description 4 which she alleges is applicable
here, no contract ever existed between her and VMS and therefore none had
been assigned in favor of private respondent.
She contends that it is not necessary, as opined by
the appellate court, to implead VMS as a party to the
case before it can be made to answer for damages
because VMS was earlier sued by her for "breach of
contract with damages" before the Regional Trial
Court of Olongapo City, Branch LXXII, docketed as
Civil Case No. 2916-0. She cites as authority the
decision therein where the court originally ordered
petitioner to pay the remaining balance of the motor
vehicle installments in the amount of P31,644.30
representing the difference between the agreed
consideration of P49,000.00 as shown in the sales
invoice and petitioner's initial downpayment of
P17,855.70 allegedly evidenced by a receipt. Said
decision was however reversed later on, with the
same court ordering defendant VMS instead to
return to petitioner the sum of P17,855.70.
Parenthetically, said decision is still pending
consideration by the First Civil Case Division of the
Court of Appeals, upon an appeal by VMS, docketed
as AC-G.R. No. 02922. 5
Private respondent in its comment, prays for the
dismissal of the petition and counters that the issues
raised and the allegations adduced therein are a mere
rehash of those presented and already passed upon in
the court below, and that the judgment in the "breach
of contract" suit cannot be invoked as an authority as
the same is still pending determination in the
appellate court.
We see no cogent reason to disturb the challenged
decision.
The pivotal issue in this case is whether the
promissory note in question is a negotiable
instrument which will bar completely all the
available defenses of the petitioner against private
respondent.
Petitioner's liability on the promissory note, the due
execution and genuineness of which she never
denied under oath is, under the foregoing factual
milieu, as inevitable as it is clearly established.
The records reveal that involved herein is not a
simple case of assignment of credit as petitioner
would have it appear, where the assignee merely
steps into the shoes of, is open to all defenses
available against and can enforce payment only to
the same extent as, the assignor-vendor.
Recently, in the case of Consolidated Plywood
Industries Inc. v. IFC Leasing and Acceptance
Corp., 6 this Court had the occasion to clearly distinguish between a
negotiable and a non-negotiable 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. 7
In the case at bar, however, the situation is different.
Indubitably, the basis of private respondent's claim
against petitioner is a promissory note which bears
all the earmarks of negotiability.
The pertinent portion of the note reads:
PROMISSORY NOTE
(MONTHLY)
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.
xxx xxx xxx
Maker; Co-Maker:
(SIGNED) JUANITA SALAS _________________
Address:
____________________ ____________________
WITNESSES
SIGNED: ILLEGIBLE SIGNED: ILLEGIBLE
TAN # TAN #
PAY TO THE ORDER OF
FILINVEST FINANCE AND LEASING
CORPORATION
VIOLAGO MOTOR SALES CORPORATION
BY: (SIGNED) GENEVEVA V. BALTAZAR
Cash Manager 8
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. 9
It was negotiated by indorsement in writing on the
instrument itself payable to the Order of Filinvest
Finance and Leasing Corporation 10 and it is an indorsement
of the entire instrument. 11
Under the circumstances, there appears to be no
question that Filinvest is a holder in due course,
having taken the instrument under the following
conditions: [a] it is complete and regular upon its
face; [b] it became the holder thereof before it was
overdue, and without notice that it had previously
been dishonored; [c] it took the same in good faith
and for value; and [d] when it was negotiated to
Filinvest, the latter had no notice of any infirmity in
the instrument or defect in the title of VMS
Corporation. 12
Accordingly, respondent corporation holds the
instrument free from any defect of title of prior
parties, and free from defenses available to prior
parties among themselves, and may enforce payment
of the instrument for the full amount thereof. 13 This
being so, petitioner cannot set up against respondent the defense of nullity of
the contract of sale between her and VMS.
Even assuming for the sake of argument that there is
an iota of truth in petitioner's allegation that there
was in fact deception made upon her in that the
vehicle she purchased was different from that
actually delivered to her, this matter cannot be
passed upon in the case before us, where the VMS
was never impleaded as a party.
Whatever issue is raised or claim presented against
VMS must be resolved in the "breach of contract"
case.
Hence, we reach a similar opinion as did respondent
court when it held:
We can only extend our sympathies to the defendant
(herein petitioner) in this unfortunate incident.
Indeed, there is nothing We can do as far as the
Violago Motor Sales Corporation is concerned since
it is not a party in this case. To even discuss the issue
as to whether or not the Violago Motor Sales
Corporation is liable in the transaction in question
would amount, to denial of due process, hence,
improper and unconstitutional. She should have
impleaded Violago Motor Sales.14
IN VIEW OF THE FOREGOING, the assailed
decision is hereby AFFIRMED. With costs against
petitioner.
SO ORDERED.
Gutierrez, Jr., Feliciano, Bidin and Cortés, JJ.,
concur.
G.R. No. L-22405 June 30, 1971
PHILIPPINE EDUCATION CO., INC., plaintiff-
appellant,
vs.
MAURICIO A. SORIANO, ET AL., defendant-
appellees.
Marcial Esposo for plaintiff-appellant.
Office of the Solicitor General Arturo A. Alafriz,
Assistant Solicitor General Antonio G. Ibarra and
Attorney Concepcion Torrijos-Agapinan for
defendants-appellees.
DIZON, J.:
An appeal from a decision of the Court of First
Instance of Manila dismissing the complaint filed by
the Philippine Education Co., Inc. against Mauricio
A. Soriano, Enrico Palomar and Rafael Contreras.
On April 18, 1958 Enrique Montinola sought to
purchase from the Manila Post Office ten (10)
money orders of P200.00 each payable to E.P.
Montinola withaddress at Lucena, Quezon. After the
postal teller had made out money ordersnumbered
124685, 124687-124695, Montinola offered to pay
for them with a private checks were not generally
accepted in payment of money orders, the teller
advised him to see the Chief of the Money Order
Division, but instead of doing so, Montinola
managed to leave building with his own check and
the ten(10) money orders without the knowledge of
the teller.
On the same date, April 18, 1958, upon discovery of
the disappearance of the unpaid money orders, an
urgent message was sent to all postmasters, and the
following day notice was likewise served upon all
banks, instructing them not to pay anyone of the
money orders aforesaid if presented for payment.
The Bank of America received a copy of said notice
three days later.
On April 23, 1958 one of the above-mentioned
money orders numbered 124688 was received by
appellant as part of its sales receipts. The following
day it deposited the same with the Bank of America,
and one day thereafter the latter cleared it with the
Bureau of Posts and received from the latter its face
value of P200.00.
On September 27, 1961, appellee Mauricio A.
Soriano, Chief of the Money Order Division of the
Manila Post Office, acting for and in behalf of his
co-appellee, Postmaster Enrico Palomar, notified the
Bank of America that money order No. 124688
attached to his letter had been found to have been
irregularly issued and that, in view thereof, the
amount it represented had been deducted from the
bank's clearing account. For its part, on August 2 of
the same year, the Bank of America debited
appellant's account with the same amount and gave it
advice thereof by means of a debit memo.
On October 12, 1961 appellant requested the
Postmaster General to reconsider the action taken by
his office deducting the sum of P200.00 from the
clearing account of the Bank of America, but his
request was denied. So was appellant's subsequent
request that the matter be referred to the Secretary of
Justice for advice. Thereafter, appellant elevated the
matter to the Secretary of Public Works and
Communications, but the latter sustained the actions
taken by the postal officers.
In connection with the events set forth above,
Montinola was charged with theft in the Court of
First Instance of Manila (Criminal Case No. 43866)
but after trial he was acquitted on the ground of
reasonable doubt.
On January 8, 1962 appellant filed an action against
appellees in the Municipal Court of Manila praying
for judgment as follows:
WHEREFORE, plaintiff prays that after
hearing defendants be ordered:
(a) To countermand the notice given to the Bank of
America on September 27, 1961, deducting from the
said Bank's clearing account the sum of P200.00
represented by postal money order No. 124688, or in
the alternative indemnify the plaintiff in the same
amount with interest at 8-½% per annum from
September 27, 1961, which is the rate of interest
being paid by plaintiff on its overdraft account;
(b) To pay to the plaintiff out of their own personal
funds, jointly and severally, actual and moral
damages in the amount of P1,000.00 or in such
amount as will be proved and/or determined by this
Honorable Court: exemplary damages in the amount
of P1,000.00, attorney's fees of P1,000.00, and the
costs of action.
Plaintiff also prays for such other and further relief
as may be deemed just and equitable.
On November 17, 1962, after the parties had
submitted the stipulation of facts reproduced at pages
12 to 15 of the Record on Appeal, the above-named
court rendered judgment as follows:
WHEREFORE, judgment is hereby
rendered, ordering the defendants to
countermand the notice given to the Bank
of America on September 27, 1961,
deducting from said Bank's clearing
account the sum of P200.00 representing
the amount of postal money order No.
124688, or in the alternative, to indemnify
the plaintiff in the said sum of P200.00
with interest thereon at the rate of 8-½%
per annum from September 27, 1961 until
fully paid; without any pronouncement as
to cost and attorney's fees.
The case was appealed to the Court of First Instance
of Manila where, after the parties had resubmitted the
same stipulation of facts, the appealed decision
dismissing the complaint, with costs, was rendered.
The first, second and fifth assignments of error
discussed in appellant's brief are related to the other
and will therefore be discussed jointly. They raise
this main issue: that the postal money order in
question is a negotiable instrument; that its nature as
such is not in anyway affected by the letter dated
October 26, 1948 signed by the Director of Posts and
addressed to all banks with a clearing account with
the Post Office, and that money orders, once issued,
create a contractual relationship of debtor and
creditor, respectively, between the government, on
the one hand, and the remitters payees or endorses,
on the other.
It is not disputed that our postal statutes were
patterned after statutes in force in the United States.
For this reason, ours are generally construed in
accordance with the construction given in the United
States to their own postal statutes, in the absence of
any special reason justifying a departure from this
policy or practice. The weight of authority in the
United States is that postal money orders are not
negotiable instruments (Bolognesi vs. U.S. 189 Fed.
395; U.S. vs. Stock Drawers National Bank, 30 Fed.
912), the reason behind this rule being that, in
establishing and operating a postal money order
system, the government is not engaging in
commercial transactions but merely exercises a
governmental power for the public benefit.
It is to be noted in this connection that some of the
restrictions imposed upon money orders by postal
laws and regulations are inconsistent with the
character of negotiable instruments. For instance,
such laws and regulations usually provide for not
more than one endorsement; payment of money
orders may be withheld under a variety of
circumstances (49 C.J. 1153).
Of particular application to the postal money order in
question are the conditions laid down in the letter of
the Director of Posts of October 26, 1948 (Exhibit 3)
to the Bank of America for the redemption of postal
money orders received by it from its depositors.
Among others, the condition is imposed that "in
cases of adverse claim, the money order or money
orders involved will be returned to you (the bank)
and the, corresponding amount will have to be
refunded to the Postmaster, Manila, who reserves the
right to deduct the value thereof from any amount
due you if such step is deemed necessary." The
conditions thus imposed in order to enable the bank
to continue enjoying the facilities theretofore
enjoyed by its depositors, were accepted by the Bank
of America. The latter is therefore bound by them.
That it is so is clearly referred from the fact that,
upon receiving advice that the amount represented
by the money order in question had been deducted
from its clearing account with the Manila Post
Office, it did not file any protest against such action.
Moreover, not being a party to the understanding
existing between the postal officers, on the one hand,
and the Bank of America, on the other, appellant has
no right to assail the terms and conditions thereof on
the ground that the letter setting forth the terms and
conditions aforesaid is void because it was not issued
by a Department Head in accordance with Sec. 79
(B) of the Revised Administrative Code. In reality,
however, said legal provision does not apply to the
letter in question because it does not provide for a
department regulation but merely sets down certain
conditions upon the privilege granted to the Bank of
Amrica to accept and pay postal money orders
presented for payment at the Manila Post Office.
Such being the case, it is clear that the Director of
Posts had ample authority to issue it pursuant to Sec.
1190 of the Revised Administrative Code.

In view of the foregoing, We do not find it necessary

to resolve the issues raised in the third and fourth
assignments of error.

WHEREFORE, the appealed decision being in

accordance with law, the same is hereby affirmed
with costs.

Concepcion, C.J., Reyes, J.B.L., Makalintal,

Zaldivar, Fernando, Teehankee, Barredo and
Villamor, JJ., concur.

Castro and Makasiar, JJ., took no part.