Myline Cordial

Consolidated Plywood Industries Inc., et. al. vs. IFC Leasing and Acceptance Corporation
G.R. No.72593, April 30 1997

FACTS: Petitioner, Consolidated Plywood Industries, Inc. was offered by Industrial Products Marketing (the seller-assignor) two “used” tractors to be used in the logging activities of petitioner with the assurance that the two tractors were fit to cover the extent of work needed and the warranty of ninety (90) days performance of the machines and availability of parts. Petitioner purchased on installment said used tractors and paid the down payment. The parties executed a deed of sale with chattel mortgage with promissory note which reads:

FOR VALUE RECEIVED, I/we jointly and severally promise to pay to the INDUSTRIAL PRODUCTS MARKETING, the sum of ONE MILLION NINETY THREE THOUSAND SEVEN HUNDRED EIGHTY NINE PESOS & 71/100 only (P1,093 789.71) Philippine Currency the said principal sum to be payable in 24 monthly installments starting July 15, 1978....

Simultaneously, with the execution of the deed, the seller – assignor assigned its rights and interest in the chattel mortgage in favor of respondent IFC Leasing and Acceptance Corporation by means of a deed of assignment. However, 14 days after delivery the first tractor broke down and nine days thereafter the second tractor became inoperable.

ISSUE: Is the promissory note in question a negotiable instrument?

RULING No, an instrument in order to be considered negotiable, it must contain the so-called ” words of negotiability” must be payable to order or bearer. Those words serve as an expression of consent that the instrument may be transferred.

An instrument, to be made payable to order, there must always be a specified person named in the instrument. It means that the bill or note is to be paid to the person designated in the instrument or to any person to whom he has endorsed and delivered the same without the words or on 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 be thus open to all defenses available against the latter.