Escolar Documentos
Profissional Documentos
Cultura Documentos
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* SECOND DIVISION.
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II
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x x x x x x x x x
"From the evidence presented by the parties on the issue of
warranty, We are of the considered opinion that aside from the
fact that no provision of warranty appears or is provided in the
Deed of Sale of the tractors and even admitting that in a contract
of sale unless a contrary intention appears, there is an implied
warranty, the defense of breach of warranty, if there is any, as in
this case, does not lie in favor of the appellants and against the
plaintiffappellee who is the assignee of the promissory note and a
holder of the same in due course. Warranty lies in this case only
between Industrial Products Marketing and Consolidated
Plywood Industries, Inc. The plaintiffappellant herein upon
application by appellant corporation granted financing for the
purchase of the questioned units of FiatAllis Crawler Tractors.
x x x x x x x x x
"Holding that breach of warranty if any, is not a defense
available to appellants either to withdraw from the contract
and/or demand a proportionate reduction of the price with
damages in either case (Art. 1567, New Civil Code). We now come
to the issue as to whether the plaintiffappellee is a holder in due
course of the promissory note.
'To begin with, it is beyond arguments that the
plaintiffappellee is a financing corporation engaged in financing
and receivable discounting extending credit facilities to
consumers and industrial, commercial or agricultural enterprises
by discounting or factoring commercial papers or accounts
receivable duly authorized pursuant to R.A. 5980 otherwise
known as the Financing Act.
"A study of the questioned promissory note reveals that it is a
negotiable instrument which was discounted or sold to the IFC
Leasing and Acceptance Corporation for P800,000.00 (Exh. "A")
considering the following: it is in writing and signed by the
maker; it contains an unconditional promise to pay a certain sum
of money payable at a fixed or determinable future time; it is
payable to order (Sec. 1, NIL); the promissory note was negotiated
when it was transferred and delivered by IPM to the appellee and
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duly endorsed to the latter (Sec. 30, NIL); it was taken in the
conditions that the note was complete and regular upon its face
before the same was overdue and without
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notice, that it had been previously dishonored and that the note is
in good faith and for value without notice of any infirmity or
defect in the title of IPM (Sec. 52, NIL); that IFC Leasing and
Acceptance Corporation held 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 against all parties liable
thereon (Sec. 57, NIL); the appellants engaged that they would
pay the note according to its tenor, and admit the existence of the
payee IPM and its capacity to endorse (Sec. 60, NIL).
"In view of the essential elements found in the questioned
promissory note, We opine that the same is legally and
conclusively enforceable against the defendantsappellants.
"WHEREFORE, finding the decision appealed from according
to law and evidence, We find the appeal without merit and thus
affirm the decision in toto. With costs against the appellants." (pp.
5055, Rollo)
I.
II.
III.
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455
IV.
V.
VI.
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usage of trade.
x x x x x x x x x
"ART. 1566. The vendor is responsible to the vendee for any
hidden faults or defects in the thing sold, even though he was not
aware thereof.
"This provision shall not apply if the contrary has been
stipulated, and the vendor was not aware of the hidden faults or
defects in the thing sold." (Italics supplied).
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"ART. 1567. In the cases of articles 1561, 1562, 1564, 1565 and
1566, the vendee may elect between withdrawing from the contract
and demanding a proportionate reduction of the price, with
damages in either case." (Italics supplied)
"In other words, the party who deems the contract violated may
consider it resolved or rescinded, and act accordingly, without
previous court action, but it proceeds at its own risk. For it is only
the final judgment of the corresponding court that will
conclusively and finally settle whether the action taken was or
was not correct in law. But the law definitely does not require that
the contracting party who believes itself injured must first file suit
and wait for a judgment before taking extrajudicial steps to protect
its interest. Otherwise, the party injured by the other's breach will
have to passively sit and watch its damages accumulate during the
pendency of the suit until the final judgment of rescission is
rendered when the law itself requires that he should exercise due
diligence to minimize its own damages (Civil Code, Article 2203)."
(Italics supplied)
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"ATTY. PALACA:
"Did we get it right from the counsel that what is being assigned
is the Deed of Sale with Chattel Mortgage with the promissory
note which is as testified to by the witness was indorsed? (Counsel
for Plaintiff nodding his head.) Then we have no further questions
on cross.
"COURT:
"ATTY. ILAGAN:
"COURT:
"ATTY. ILAGAN:
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ing, and the respondent whereby the latter would pay the
sellerassignor the entire purchase price and the
sellerassignor, in turn, would assign its rights to the
respondent which acquired the right to collect the price
from the buyer, herein petitioner Consolidated Plywood
Industries, Inc.
A mere perusal of the Deed of Sale with Chattel
Mortgage with Promissory Note, the Deed of Assignment
and the Disclosure of Loan/Credit Transaction shows that
said documents evidencing the sale on installment of the
tractors were all executed on the same day by and among
the buyer, which is herein petitioner Consolidated Plywood
Industries, Inc.; the sellerassignor which is the Industrial
Products Marketing; and the assigneefinancing company,
which is the respondent. Therefore, the respondent had
actual knowledge of the fact that the sellerassignor's right
to collect the purchase price was not unconditional and that
it was subject to the condition that the tractors sold were
not defective. The respondent knew that when the tractors
turned out to be defective, it would be subject to the defense
of failure of consideration and cannot recover the purchase
price from the petitioners. Even assuming for the sake of
argument that the promissory note is negotiable, the
respondent, which took the same with actual knowledge of
the foregoing facts so that its action in taking the
instrument amounted to bad faith, is not a holder in due
course. As such, the respondent is subject to all defenses
which the petitioners may raise against the sellerassignor.
Any other interpretation would be most inequitous to the
unfortunate buyer who is not only saddled with two useless
tractors but must also face a lawsuit from the assignee for
the entire purchase price and all its incidents without
being able to raise valid defenses available as against the
assignor.
Lastly, the respondent failed to present any evidence to
prove that it had no knowledge of any fact, which would
justify its act of taking the promissory note as not
amounting to bad faith.
Sections 52 and 56 of the Negotiable Instruments Law
provide that:
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" 'lt may be that our holding here will require some changes in business
methods and will impose a greater burden on the finance companies. We
think the buyerMr. & Mrs. General Publicshould have some
protection somewhere along the line. We believe the finance company is
better able to bear
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Acceptance Corporation
the risk of the dealer's insolvency than the buyer and in a far better
position to protect his interests against unscrupulous and insolvent
dealers. . . .
" 'lf this opinion imposes great burdens on finance companies it is a
potent argument in favor of a rule which will afford public protection to
the general buying public against unscrupulous dealers in personal
property. . . .' (Mutual Finance Co. v. Martin, 63 So. 2d 649, 44 ALR 2d 1
[1953])" (Campos and Campos, Notes and Selected Cases on Negotiable
Instruments Law, Third Edition, p. 128).' "
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o0o
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